We've been in a recession and many people are having a tough time making ends meet. Unemployment and mounting consumer debt are putting many Americans on the brink of insolvency. Cash strapped households are desperately looking for solutions. To get relief many turn to bankruptcy - but is bankruptcy a good option for everyone struggling to make ends meet? The answer depends on your individual situation and consulting an experienced bankruptcy attorney should be your first step. But here are some bankruptcy basics to help you decide if bankruptcy is right for you.
Bankruptcy is governed by federal law. This means the law is the same and will not change from State-to-State. There are some limited exceptions to this but those exceptions are highly technical and aren't relevant here.
The simplest and the most straight forward bankruptcy is a Chapter 7. If the debtor's assets are less than what the debtor owes, the debtor may file for Chapter 7 protection. The filing of the bankruptcy petition will trigger the automatic stay. This means creditors, collection agencies, and even the IRS cannot contact the debtor. The automatic stay remains in effect for as long as the case is pending before the bankruptcy court. In most consumer bankruptcies, this is usually several months.
Once the case is concluded, the bankruptcy judge issues what is known as a discharge order. A discharge order relieves the debtor from responsibility to pay the debts the court has discharged. Unless a debt is specifically mentioned in the discharge order, it is not discharged.
Certain types of debts are not dischargeable. The best examples are student loans, child and spousal support obligations, criminal fines, and certain legal judgements. Therefore, bankruptcy is not helpful to those whose financial difficulties stem from non-dischargeable debts. An experienced attorney is the best person to analyze debts in order to determine which of your debts are dischargeable.
If you have further questions regarding filing for bankruptcy, I offer a free 30 minute telephone consultation where you can get all your questions answered.