What is bankruptcy?

Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.
 

What can bankruptcy do for me?

Bankruptcy may make it possible for you to:

• Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.
   

• Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
   

• Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
   

• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
   

• Restore or prevent termination of utility service.
  
  

What bankruptcy cannot do.

Bankruptcy cannot cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

• Eliminate certain rights of “secured” creditors. A “secured” creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
   

• Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.
   

• Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
   

• Discharge debts that arise after bankruptcy has been filed.

Learn more about bankruptcy basics

Chapter 7 Bankruptcy

If you are covered up in unsecured debt, like credit cards, but your payments are current on your secured debts, like your home or card. This may be the right answer for you if you meet the Chapter 7 means test. It allows you to discharge your unsecured debts while affirming your secured debts that you want to keep.

Learn more about chapter 7 bankruptcy

Chapter 13 Bankruptcy

Often referred to as the wage earner's chapter, it's mainly for those trying to protect their home or car or for those who make too much money for Chapter 13. It allows you to work out a plan with your creditors over a 60 month period. All repossession and collection actions are stopped while the plan is in place.

Learn more about chapter 13 bankruptcy  

Common Myths About Bankruptcy

The average American knows very little about bankruptcy. Most people are probably aware of bankruptcy’s ability to dissolve debt and give the debtor a fresh start. However, some of the information you may have heard from your creditors, friends, and family is often false.

The though of exploring bankruptcy is very stressful for most people. Therefore, seeking the help of an experienced bankruptcy attorney will not only help you dispel some of the most common bankruptcy myths but will help you find out if bankruptcy is your best option.

Some of the most common myths about bankruptcy are:

Myth 1: Under the New bankruptcy law, there's no more bankruptcy.

Myth 2: Everyone will know you have filed for bankruptcy.

Myth 3: You will lose everything you have.

Myth 3: You will never be able to own anything again.

Myth 4: You will never get credit again.

Myth 5: Filing bankruptcy will hurt your credit for 10 years.

Myth 6: If you're married, both you and your spouse have to file for bankruptcy.

Myth 7: It's really hard to file for bankruptcy.

Myth 8: Only deadbeats file for bankruptcy.

Myth 9: Filing bankruptcy means you're a bad person.

Myth 10: You can only file once for bankruptcy protection.

Myth 11: Even if you file for bankruptcy, creditors will still harass you and your family.

Myth 12: There is a minimum amount of debt required to file for bankruptcy.

Myth 13: You can't get rid of back taxes in bankruptcy.

Find the answers to each of these myths