Bankruptcy is an important weapon in every debtor's arsenal.
It can allow a fresh start when a person becomes overwhelmed by debt. Becoming heavily burdened by debt can happen for many legitimate reasons, and that is why the U.S. Constitution provides for a Bankruptcy Code. In an effort to meet every debtor's needs, the law provides for many types of bankruptcy. Each type has a specific set of goals. The U.S. Bankruptcy Code provides types of bankruptcy protection for consumers who experience an overwhelming debt; see (Which Chapter of Bankruptcy is Right for Me?). While personal bankruptcy has the effect of canceling most or all of your debt, if not properly filed and litigated, risk of loss of property & other assets, even income, is greatly increased. This is why an attorney should be retained to get the job done in the most efficient and expedient manner.
Which Chapter of Bankruptcy is right for me?
The most common consumer bankruptcy is the Chapter 7 Bankruptcy. It is often called a "Fresh Start". The goal is to relieve you of your debts in order to allow a fresh start & a new beginning. A person can file for Chapter 7 Bankruptcy once every 6 years. This form of bankruptcy is designed for individuals with limited assets. In most circumstances, a Chapter 7 filing will not change a debtor's life except for the fact that they will not have to pay back their debts & their credit report will list the bankruptcy for 10 years. The Chapter 7 process begins when you retain an attorney, then you may contact your creditors and inform them you have retained counsel. Your attorney will prepare your petition upon your full payment of the retainer. After about 40 days you must attend a meeting consisting of you, your attorney, and a Trustee/Attorney appointed by the court to discuss your petition. This meeting usually lasts about 5 minutes, and you normally do not have to go to court. The meeting is held in an office building not at the court house.
The other commonly filed consumer bankruptcy is a Chapter 13 Bankruptcy. While a Chapter 7 Bankruptcy is for people with limited assets, a Chapter 13 Bankruptcy is designed for individuals with more substantial assets. With this chapter, an individual is not normally discharged from all his/her debt. The debtor makes arrangements with the court to pay back most of the money he/she owes over a three to five year period. It allows an individual to pay back the past due portion on secured debts like a home mortgage, or a car loan, over time. The major difference from a Chapter 7 is that the debtor makes an agreement to pay a fixed monthly amount to the Bankruptcy Court much like a consolidation payment based on income, expenses, and amount of debt. The Court appoints a Trustee/Attorney to collect the money and pay it to your creditors. The debtor makes an agreement with the court (plan) and abides by that agreement. This chapter is normally used by people with homes, who have fallen behind on the mortgage(s). Like any bankruptcy filing, Chapter 13 STOPS foreclosure actions. This chapter is also used for student loans and taxes. It provides the debtor a more feasible way of paying back his/her debts.
Will I Ever Get Credit Again?
A common fear of debtors is that they will never get credit again....This is simply not true !!! There are many ways that a debtor can rebuild his/her credit. Bankruptcy is just the beginning point. While it is true that your credit report will show the bankruptcy for 10 years, in no way is this to be used as a measuring stick for re-establishing your credit. One of the 1st recommendations from our office will be that you obtain a secured credit card (which is offered by most banks). With the secured card, you must first open a bank account. The bank then issues a credit card. Your credit line will start out as one and a half times the amount on deposit. For example, depositing $500 in the bank will allow you a credit line of $750.
Eventually, as your credit history strengthens, your credit line may increase without any further deposit. It is important for you to note that every bank varies in its individual policies on secured credit cards.
A common misconception about the bankruptcy law is that a debtor will lose all of his/her property.
The law specifically provides for a way for you to keep all or most of your property. During your consultation with Mr. Farinella every option, benefit, and risk will be explained to you in detail. When a debtor files for bankruptcy, cancellation of all debts is the usual scenario, but you may choose to pay back, or reaffirm any debt, including a mortgage on your home, a loan on your car, or even an unsecured credit card. Some credit card companies will offer you the opportunity to remain a cardholder. Be advised that not all credit card companies are willing to enter into reaffirmation agreements.
BANKRUPTCY