What is Bankruptcy?
If you are reading this, I assume that you are an individual, married or single, a wage earner in private or public employment, or perhaps a professional, a store owner, or in a family business of some kind. If you are in business, you may be incorporated, or a partner, or a sole proprietor. If you are married, you can both file bankruptcy for the same cost, although it may not be necessary for both of you to file, in which case only one of you will. This will usually have no effect on the other’s credit.
Bankruptcy is a legal procedure established by the United States Bankruptcy Code for relief from debt. It is available to people like you, and to businesses of all sizes, and even to cities and states. Bankruptcy laws, in one form or another, have existed at least as far back as Biblical times. Like surgery, it is something that nobody wants to have to do. But if you must, it is legal and honest to take your creditors to Bankruptcy Court, and to leave them there.
There are several types of bankruptcy, called by their chapter numbers in the U. S. Bankruptcy Code. The types of bankruptcy available to consumer debtors are cases filed under chapter 7, chapter 11, chapter 13 and Chapter 12. Consumer debtors, individuals and couples like yourselves, almost always file under chapter 7 or 13. Under 7 you can wipe out most or all of your debts, and usually keep all of your property. In a chapter 13 case you can get up to five years to catch up on your mortgage arrears, as in a foreclosure situation. You can probably forget about chapter 11. That chapter is usually used for big businesses like Chrysler or General Motors. Chapter 13 does about the same thing, and it is easier and less expensive. Chapter 12 is for farmers and fisherman. There is more information on these chapters on other pages of this website.
A bankruptcy case is begun by preparing and filing a petition, listing your property, debts, income and expenses, and some information about your financial history. A court filing fee must be paid. After filing, the Court mails a notice to you and to each of your creditors, informing them that they must stop calling you or otherwise trying to collect their debt from you. From the moment the petition is filed they must halt lawsuits against you, foreclosures, wage deductions and restraints on bank accounts, or face severe penalties. In an emergency, a petition can be filed in about an hour for you.
Your case is assigned to a “Trustee”, who is a lawyer designated by the Court to represent the interests of your creditors. A “creditors meeting” with the trustee is usually held about 5 or 6 weeks after filing. This will be in White Plains if you live in Rockland or Westchester, and in Poughkeepsie if you are in Orange, Dutchess, Ulster, Sullivan or Putnam Counties. I will be there with you, but creditors almost never show up. The session will usually take about five to ten minutes. The trustee will ask you some questions. I will be able to tell you in advance what to expect, based on my knowledge of your case and my experience with the trustee. Your debts are usually discharged, and the case completed, about two months after the meeting.
Bankruptcy allows you to get rid of (to have discharged by the Court) most types of consumer debts, including credit cards, personal loans, car loans and home mortgages, or, if you want to keep the house and the car, to have some control over how you will pay those debts. Some debts you can’t get away from: family support obligations like maintenance (alimony) and child support. Also tax debts less than 3 years old and student loans. These are usually non-dischargeable.
If you are thinking about filing bankruptcy soon, you may be wondering whether or not to continue making payments on the debts you are going to get rid of. Don’t do anything without getting advice from a lawyer who knows bankruptcy. And certainly, if you are thinking about filing, don’t run up any more debt. That would be dishonest, and the additional debt might not be dischargeable.
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What is Bankruptcy?
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