Frequently Asked Questions About Bankruptcy
WHAT IS CHAPTER 7?
Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee collects the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, the debtor receives a discharge that releases the debtor from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed.
WHAT IS CHAPTER 12?
Chapter 12 bankruptcy is another subset or type of bankruptcy. It is only available to family farmers or family fishermen. Designed as a response to difficulties suffered by farmers and fishermen in the 1980s, it is very similar to Chapter 13, but provides more flexibility in making periodic payments to take into account the seasonal nature of many farming or fishing operations. Similar to Chapter 13, the farmer or fisherman proposes a repayment plan that lasts 3 to 5 years.
An individual, a married couple and in some instances, a corporation with a farming or commercial fishing operation may file for Chapter 12. The debts limits of Chapter 12 are higher than Chapter 13. For a family farmer, at least 50% of their debts must come from the farming operation and more than 50% of the gross income must come from the farming or fishing operation for the prior tax year.
WHAT IS CHAPTER 13?
Chapter 13, entitled Adjustment of Debts of an Individual with Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house. It is also favored because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. At a confirmation hearing, the court either approves or disapproves the plan, depending on whether the plan meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7, since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect. The discharge is also considerably broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.
HOW DOES BANKRUPTCY HELP?
From an individual debtor’s standpoint, one of the primary goals of filing a bankruptcy case is to obtain relief from burdensome debt. Relief is attained through the bankruptcy discharge, the purpose of which is to provide a “fresh start” to the honest debtor.
WHAT IS A DISCHARGE IN BANKRUPTCY?
Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
ARE ALL DEBTS DISCHARGED?
Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor’s drunken driving).
A broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case. As a general rule, the chapter 13 debtor is discharged from all debts provided for by the plan except certain long-term obligations (such as a home mortgage), debts for alimony or child support, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime.
WILL FILING BANKRUPTCY AFFECT MY JOB?
A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case. The law provides express prohibitions against discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case. The law prohibits the following forms of governmental discrimination: terminating an employee; discriminating with respect to hiring; or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege. A private employer may not discriminate with respect to employment if the discrimination is based solely upon the bankruptcy filing.
WHO CAN I INCLUDE IN MY BANKRUPTCY?
You should list anybody and everybody that you might owe money or who might assert a claim of any kind against you. This includes taxes, child support, student loans, credit cards, medical bills, utilities, mortgages, car loans, finance companies, credit unions, etc. They might not all be treated the same in your case, and some might not be discharged, but every one of your creditors should be listed.
I’VE HEARD THAT BANKRUPTCY CAN RUIN MY CREDIT.
Many people believe there is perfect credit and poor credit without much in between. By the time most people come to see us, their credit report has already been beaten up by creditors – or soon will be. Filing bankruptcy puts an end to all of that and creates a new beginning. Like many other items, bankruptcy can be held on your credit report for 7-10 years. However, your report will show your filing date and date of discharge. This tells future creditors that all of the entries dated before are no longer relevant.
ONCE I HAVE COMPLETED MY CASE, HOW CAN I REBUILD MY CREDIT?
Credit is important, and the truth is that your mail box will be full of credit card offers after your case is over. Credit cards can be useful for renting a car or making hotel reservations. Often debit cards work just as well. We recommend that you spend time with a qualified credit counselor in order to make wise financial decisions from this point forward.
HOW CAN I GET A COPY OF MY CREDIT REPORT?
Under Georgia Law you are entitled to one free copy of your report per year. The major reporting agencies are:
HOW DO I GET STARTED?
For your convenience we have provided our intake questionnaire that you can print and complete at your convenience. Then, call our office at 229-233-4228 and make an appointment for a FREE OFFICE CONSULTATION. Naturally, if you have any questions in the meantime, please do not hesitate to call.