WHAT IS A BANKRUPTCY DISCHARGE?The filing of a chapter 7 petition is designed to result in a discharge of most of the debts you listed on your bankruptcy schedules. A discharge is a court order that says you do not have to repay your debts, but there are a number of exceptions. Debts which may not be discharged in your chapter 7 case include, for example, most taxes, child support, alimony, and student loans; court-ordered fines and restitution; debts obtained through fraud or deception; and personal injury debts caused by driving while intoxicated or taking drugs. Your discharge may be denied entirely if you, for example, destroy or conceal property; destroy, conceal or falsify records; or make a false oath. Creditors cannot ask you to pay any debts which have been discharged. You can only receive a chapter 7 discharge once every eight (8) years.
WHAT ARE THE POTENTIAL EFFECTS OF A DISCHARGE?The fact that you filed bankruptcy can appear on your credit report for as long as 10 years. Thus, filing a bankruptcy petition may affect your ability to obtain credit in the future. Also, you may not be excused from repaying any debts that were not listed on your bankruptcy schedules or that you incurred after you filed for bankruptcy.
WHAT ARE THE EFFECTS OF REAFFIRMING A DEBT?After you file your petition, a creditor may ask you to reaffirm a certain debt or you may seek to do so on your own. Reaffirming a debt means that you sign and file with the court a legally enforceable document, which states that you promise to repay all or a portion of the debt that may otherwise have been discharged in your bankruptcy case. Reaffirmation agreements must generally be filed with the court within 60 days after the first meeting of the creditors.Reaffirmation agreements are strictly voluntary — they are not required by the Bankruptcy Code or other state or federal law. You can voluntarily repay any debt instead of signing a reaffirmation agreement, but there may be valid reasons for wanting to reaffirm a particular debt. Reaffirmation agreements must not impose an undue burden on you or your dependents and must be in your best interest. If you decide to sign a reaffirmation agreement, you may cancel it at any time before the court issues your discharge order or within sixty (60) days after the reaffirmation agreement was filed with the court, whichever is later. If you reaffirm a debt and fail to make the payments required in the reaffirmation agreement, the creditor can take action against you to recover any property that was given as security for the loan and you may remain personally liable for any remaining debt.
OTHER BANKRUPTCY OPTIONSYou have a choice in deciding what chapter of the Bankruptcy Code will best suit your needs. Even if you have already filed for relief under chapter 7, you may be eligible to convert your case to a different chapter.
Chapter 7 is the liquidation chapter of the Bankruptcy Code. Under chapter 7, a trustee is appointed to collect and sell, if economically feasible, all property you own that is not exempt from these actions.
Chapter 11 is the reorganization chapter most commonly used by businesses, but it is also available to individuals. Creditors vote on whether to accept or reject a plan, which also must be approved by the court. While the debtor normally remains in control of the assets, the court can order the appointment of a trustee to take possession and control of the business.
Chapter 12 offers bankruptcy relief to those who qualify as family farmers. Family farmers must propose a plan to repay their creditors over a threeto-five year period and it must be approved by the court. Plan payments are made through a chapter 12 trustee, who also monitors the debtor’s farming operations during the pendency of the plan. Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future income. Each chapter 13 debtor writes a plan which must be approved by the bankruptcy court. The debtor must pay the chapter 13 trustee the amounts set forth in their plan. Debtors receive a discharge after they complete their chapter 13 repayment plan. Chapter 13 is only available to individuals with regular income whose debts do not exceed $1,000,000 ($250,000 in unsecured debts and $750,000 in secured debts).
AGAIN, PLEASE SPEAK TO YOUR LAWYER IF YOU NEED FURTHER INFORMATION OR EXPLANATION, INCLUDING HOWTHE BANKRUPTCY LAWS RELATE TO YOUR SPECIFIC CASE.
How Ordering Your Credit Report Can Help You in BankruptcyOur firm recommends that each of our clients filing for bankruptcy obtain a credit report for the reasons listedbelow. If you are married, we recommend obtaining credit reports for both you and your spouse.You will receive a printed copy of the report in the mail for your review.1. Obtaining the credit report helps us get accurate creditor names, addresses, types of debt, balancesdue, and account numbers.2. Through your credit report, we may find creditors whom you have overlooked. For a debt to bedischarged, it must be listed in your bankruptcy pleadings, so it’s important that we find out about alldebts.3. Credit reports can alert us to judgments against you.4. Credit reports can alert us to liens against your property, and the need to seek lien avoidance under§522(f), thus helping you protect your property in some cases.5. We may find out about co-signers to some of your debts, which are important to list in a bankruptcy.6. If you are married, there may be surprising items on your credit report or your spouse’s, and thereports can help us determine whether you should file individually or jointly.7. We may find out about debts created by a former spouse, who may have forged your signature toobtain credit.8. Credit reports can alert us to mistakes on your credit record. The report will list the names andaddresses of all three major credit bureaus whom you can contact to correct any mistakes or provideupdated information.9. Credit reports often contain the names and addresses of collection agencies representing creditors,and we can notify these collection agencies about the bankruptcy so that collection efforts stop.10. If the IRS has a tax lien on your property, the credit report will alert us so that it can be dealt withproperly.11. Knowing what is on your credit report can help you get credit approval for important purchases afteryour debts are discharged.Not every creditor reports debts to a credit bureau, so your credit report will not list all debts. Youshould be sure to let your attorney know about all debts you are aware of.