Bankruptcy Law

judge2In the current environment of upside down mortgages and low-paying jobs, bankruptcies are more common than ever.  If you find yourself in this situation, you are not alone. The word “bankruptcy” no longer carries the stigma or blow to the ego it once did, since so many people are affected. Chances are one of your neighbors is going through it right now.

Unfortunately for some, bankruptcy law itself has changed dramatically, making it harder to walk away from creditors.  The thought of filing bankruptcy may be overwhelming, but delaying resolution of the problem will only make bills mount higher.

Bankruptcy may not be the right path for you personally, but it is always a good idea to know what options are available.

  • What is Chapter 7? If your income is limited, Chapter 7 could be the right choice. Under Chapter 7, you are allowed to "exempt"--keep--certain property to start your post-bankruptcy life. Most people who file for chapter 7 keep almost everything they own. Exempt assets include: all retirement, IRA, 401(k), 403(b) 457 and similar accounts; equity in a home of up to between $75,000 and $150,000; most personal property, and a "grubstake" of any property chosen valued up to $27,100. The exemptions in each case are different, but generally people filing Chapter 7 keep all, or almost all, of their property.
  • What about Chapter 11? Chapter 13? In a nutshell, Chapter 11 is to corporations what Chapter 13 is to individuals; that is, a reorganization of your finances. If you have a steady income, you keep your property and repay creditors over an extended time period.
  • Will bankruptcy absolve me of all my debts? No. Certain categories of debt are not exempted, such as back taxes, alimony and child support, certain fines and student loans. Abuse of some of these categories is in part why Congress passed the BAPCPA.
  • Will I lose my job if my boss finds out I'm filing for bankruptcy? No. Employers are prohibited from discriminating against employees who file for bankruptcy.
  • Will bankruptcy destroy my chances of ever having good credit? No, but it will take time and a lot of hard work to reestablish trust with lenders.

The big question you might ask is:  Is bankruptcy a good choice for me?
That’s a complex decision to be made between you and your lawyer.  People who go through it learn to live with less for a time, but most say it is one of the best long-term business decisions they ever made.