Any business or individual who owes money to a creditor can file for bankruptcy. If you have debts that you cannot pay, bankruptcy can help you get out from under your debts and alleviate the stress associated with financial issues.
How often you can file for bankruptcy depends on the type of bankruptcy you have filed, Chapter 7 or Chapter 13. If you filed a Chapter 7 bankruptcy, you must wait eight years to file another Chapter 7 bankruptcy or four years to file a Chapter 13 bankruptcy in order to receive a discharge. If you file Chapter 13 prior to the four years, you may not receive another discharge. If you filed a Chapter 13 bankruptcy, you must wait six years to file a Chapter 7 bankruptcy or two years to file a Chapter 13 bankruptcy.
While there are many types of debt that you can discharge through a bankruptcy filing, you cannot discharge all debt. For example, you cannot discharge back taxes owed (unless your taxes qualify based on several requirements), debts owed to a spouse or child (e.g. child support or alimony), student loan debt, debts incurred for any legal judgment or any debts that you incur after the initial bankruptcy filing. For more information on whether a specific debt you have can or cannot be discharged, Attorney Nathan A. Berneman, APC, recommends that you consult a lawyer.
Bankruptcy can discharge your debts and reset the slate for you, financially. This can bring real and immediate relief, reduced stress and increased financial health.
Generally speaking, a bankruptcy will remain on your credit report for 7 to 10 years. While you cannot remove the bankruptcy from your credit report, you can place a letter on file with credit agencies explaining the events of your bankruptcy. This ensures that anyone who requests a copy of your credit report will see an accurate account of the events leading to your bankruptcy.
Once your petition for bankruptcy is marked as “Relief Ordered,” you cannot be contacted by a creditor. If you are contacted by a creditor, refer them to your bankruptcy case in writing. If they continue to contact you, you may be able to sue them in court. Note: This is also based on a debt that you did not leave intentionally out of the bankruptcy. Speak to Nathan A. Berneman, APC or consult a lawyer regarding this particular situation and what you can do.
Individuals and sole proprietors can file Chapter 7 bankruptcies; corporations and partnerships cannot. Chapter 7 aims to discharge your debts and provide you with a “fresh start.”
In Chapter 7 bankruptcy, you are allowed to keep any property that is exempt from your debts. Exemptions can include your car, your social security funds, most of your wages, your vacation time, and any “tools of the trade” you use for work.
In some cases, you may lose your house by filing a Chapter 7 bankruptcy. Your home and your other non-exempt assets can be sold off to discharge your debts under the terms of the bankruptcy.
Individuals who have some amount of debt can file Chapter 13 bankruptcy. There are limits on the amount of secured and unsecured debt you can have to file Chapter 13. If you have more debt than the limit, you must file Chapter 7 or Chapter 11 instead.
In Chapter 13 bankruptcy, you effectively consolidate all of your debts into one affordable monthly payment. By making every monthly payment over the set period of time determined in court (generally 3-5 years), you will pay off your debts and discharge your liability. Since payment levels are tethered to your income levels after household bills are paid, the amount you must pay each month will be within your budget. You can keep your home and other assets so long as you continue to make your monthly payments. Chapter 13 is also beneficial to save your home from foreclosure and reorganize the arrears owed to be paid over the 3-5 year period, stop garnishments, take care of liens, taxes and more.
Chapter 13 bankruptcies do not provide the same “clean slate” as Chapter 7 bankruptcies. You must make regular payment toward your debts instead of having them dissolved if you intend to keep certain items.