Hoglund Law Bankruptcy Attorneys

What is Bankruptcy

Bankruptcy is the legal process involving a person or business that is unable to repay outstanding debts. The bankruptcy process usually starts with a petition filed with the U.S. Bankruptcy Court by the person in debt. There are several types of bankruptcy outlined in the United States Bankruptcy Code, they are referred to as “chapters” in Government terms. (i.e. chapter 7 or 13). 

What is the Bankruptcy Process

The bankruptcy process starts with an individual needing to file, which usually arises when an individual has an amount of debt that exceeds their monthly budget. Finding a bankruptcy attorney is a good first step in filing for bankruptcy because they will review your situation with you as well as your assets and see if filing is in your best interest. Next, in order to file Bankruptcy you need to gather some important financial information for your Bankruptcy attorney: your monthly budget, a list of creditors with addresses and amount owed, the previous two years’ state and federal tax returns and year to date gross income, your most recent pay stubs or proof of other income you receive such as social security or disability, unemployment, or pension, any summons, garnishments, judgements or similar documents, foreclosure or sheriff sale notice. The attorney will carefully review the information and decide if Bankruptcy is the right option for you. Once that is completed, the attorney will put together the paperwork to file bankruptcy for you. The attorney will file the petition with the bankruptcy court. Shortly thereafter, your creditors will be notified. You and your attorney will create a time for a meeting of creditors. Usually there are some items needed for this meeting such as: Driver’s license, Social Security card, and recent pay stub). The next step is your attorney will then have an opportunity to have another meeting with you and give back documents and provide you a copy of your credit report. They will suggest programs to help you rebuild your credit. From there, it is a fresh start to improve your credit score. 

Who Declares Bankruptcy

Bankruptcy is declared by either individual consumers or businesses. Usually bankruptcy is filed because they have far more debts than money and they cannot see a change coming to fix the problem. Bankruptcy is not an uncommon thing; many people or businesses file every year. In 2015, there were 844,495 cases filed. Most of them are by individuals. The individuals who file have a median income of $34,392.

When should i declare bankruptcy

When you consider filing for bankruptcy, take a step back and think whether this is the right choice for you and your financial standing. Filing for bankruptcy needs to be worthwhile for you. Meet with a bankruptcy attorney to see if bankruptcy is the right path. If you cannot pay your bills now, or in the near future, bankruptcy may be a very good option. This is especially true with medical bills and credit cards.

There are some red flags to look for when considering bankruptcy. If you meet any of the red flags, you may want to consider bankruptcy. One, debt collectors are calling. If you are behind on bills to the point that debt collectors are reaching out to you, it may be time to consider bankruptcy. Two, if you are in danger of losing your home or other assets.  Filing for bankruptcy can help you get caught up in payments. Three, you’re using loans to pay off debts. If you find yourself needing loans to pay off debts, bankruptcy is probably the option for you. Four, if you are using, or liquidating, your retirement assets, you should consider bankruptcy. Most retirement money is exempt from bankruptcy. So, there is no reason to burn through your retirement savings. 

Types of Bankruptcy

There are several types of bankruptcies. Chapter 7, 11, 12, 13, and 15. Chapter 7 is a liquidation bankruptcy. Chapter 11 is a large reorganization of a debtor’s assets, business affairs, and debt. Chapter 12 is family farmer’s bankruptcy. Chapter 13 is typically a consumer repayment plan. Chapter 15 is used in foreign cases. The two most common consumer, or individual, bankruptcies are Chapter 7 and 13.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common type of consumer bankruptcy. Chapter 7 bankruptcy is a liquidation case. A Trustee from the U.S. Bankruptcy court is appointed to administer the case. Chapter 7 typically will discharge or eliminate credit card balances, installment loans, medical bills, and most other unsecured debt. In nearly all cases, a debtor will keep all his or her belongings and property. If a debtor is current with his or her mortgage and automobile payments, a debtor typically can continue the payments to his or her lender and to retain possession in virtually all Chapter 7 cases.

Chapter 13 (or Wage Earner Plan) is a type of bankruptcy in which the debtor proposes an affordable repayment plan to the Chapter 13 Trustee. Chapter 13 allows individuals to retain their property and personal belongings that may otherwise not be exempt. Usually, a debtor will file a Chapter 13 Plan to retain possession of homes or automobiles that the debtor fears may be repossessed or foreclosed. Chapter 13 can help the debtor catch up on auto or home loans that are past-due, and pay for non-dischargeable taxes, back child support and student loans.

Chapter 13 Bankruptcy

Debt Settlement

Debt settlement comes into play when you have many late or skipped payments and, possibly, collections accounts. Debt settlement companies negotiate with creditors to reduce what you owe, mostly on unsecured debt such as credit cards. It’s not an option for certain types of debt, such as a house that can be foreclosed or a car that can be repossessed. Settlement offers only work if it seems you will not pay at all.

What does Filing Bankruptcy Not Do

There are many debts that cannot be erased with bankruptcy. They are as follows:

1. Debts you intentionally did not list in your bankruptcy papers, may not be discharged.

2. Child support and alimony.

3. Debts for personal injury or death caused by intoxicated driving.

4. Student loans, unless it would be an undue hardship for you to repay, which means there is a reason why you are unable to pay your burden.

5. Fines and penalties imposed for violating the law, such as traffic tickets and criminal restitution.

6. Debts you incurred based on fraud, such as lying on a credit application.

7. Credit purchases of $1,150 or more of luxury goods or services made within sixty days of filing.

8. Debts from embezzlement, larceny or breach of trust.

9. Mutual debt incurred through a divorce decree, and 10. The taxes were assessed, and you received notice of this from the IRS at least 240 days (8 months) before you filed for bankruptcy.