What is the "Fresh Start" Promised by the US Bankruptcy Court?

The fresh start promised by the U.S. Bankruptcy Court means that the debt people have accumulated over the years and are no longer able pay is eliminated. Bankruptcy is a process used by individuals and businesses that to reorganize or repay their debts. Unlike other forms of debt management such as debt settlement, bankruptcy is the only process that provides individuals with legal protection against creditors.

Immediate Fresh Start

The bankruptcy process gives people an immediate fresh start. For example, once the bankruptcy cases are filed creditors are stopped from pursuing any debt collection. Thus, creditors can’t pursue wage garnishments, file lawsuits, make harassing phone calls or foreclose on property. The bankruptcy court formally calls this an automatic stay. The stay starts when the cases are filed and continuous throughout the life of the bankruptcy cases.

Long-term Fresh Start

After bankruptcy cases are discharged or successful completed, individuals won’t have to worry about their past debt. Thus, people can obtain new credit, purchase home or cars without their prior debt holding them back. Also, they are able to rebuild their credit because the fresh start gives their credit history a clean slate.

Bankruptcy Options

Individuals have two options when filing personal bankruptcy. If people have regular income, they can file chapter 13 bankruptcy cases. Chapter 13, also called wage earner’s bankruptcy allows individuals to repay the debt they owe to creditors. Typically, the bankruptcy court allows people to make repayment plans that will pay the debt off in three to five years.    

Chapter 7, commonly called reorganization bankruptcy, allows people who can’t afford to repay creditors a more detailed fresh start. Unlike chapter 13, under chapter 7 people won’t have to repay any money to their creditors. However, chapter 7 does come with drawbacks. For example, individuals may have to turn over some of their property to the bankruptcy trustee. The trustee sells the property then distributes the proceeds from the sale to creditors. Typically, chapter 7 last three to six months before debts are discharged.   

Seek Legal Assistance

When considering bankruptcy, individuals should consult bankruptcy attorneys. They can guide individuals through the bankruptcy process which includes calculating which bankruptcy chapter is best and filing the cases. Or bankruptcy attorneys can determine if people are judgment proof and may not need to file bankruptcy at all.