(A debt relief agency) - Bankruptcy is an area of law that has seen quite a bit of change over the last several years. The Bankruptcy laws changed significantly in October of 2005 and continue to change as the economy changes and due to decisions by the various bankruptcy courts. There are general requirements for the filing of a bankruptcy and very specific requirements depending on whether the bankruptcy will be to completely wipe out debt (usually a Chapter 7) or to pay all or part of the debt over time ( usually a Chapter 13). Personal bankruptcy is available to both individuals and to married couples.
Prior to filing a bankruptcy, a careful and thorough analysis of the client's finances is necessary as well as a review of assets and debts and how those assets and debts are titled. There are classes that are required before the filing and after the filing and if those classes are not taken in a timely manner, the bankruptcy could be dismissed without the order of discharge. The discharge order is the order that completes the case for general client purposes.
One of the main reasons that people file bankruptcy is to obtain relief from the telephone calls of creditors, collection agencies and from lawsuits filed to collect debts. Fortunately, upon filing of a bankruptcy, with a few exceptions, creditors, collection agencies and others are forbidden from continuing collection activity without permission of the bankruptcy court. Therefore, bankruptcy can delay or stop a sheriff sale, a collection lawsuit and certain activities of the IRS. Consulting with a knowledgeable attorney is important in the filing of bankruptcy.
This is what most people refer to as a liquidation or a total bankruptcy. In a Chapter 7, assets that cannot be protected under the law are sold and creditors receive a fair percentage. However, in many cases, the client retains most or all of their assets. This is because bankruptcy is supposed to be a fresh start and clients/debtors are permitted to keep certain assets depending upon the type of asset and its value.
A Chapter 13 is typically referred to a wage earner bankruptcy. The debtors must have a regular and provable source of income and must have enough income so that after they pay their living expenses, there is something left to pay the creditors. However, the analysis includes equity in assets as well as whether there is any tax debt and the type of tax debt.
Chapter 13 is often used to repay past due mortgage payments while paying the regular mortgage payment. By using Chapter 13, the client/debtor may keep a home that is in foreclosure and Chapter 13 also permits repayment of taxes, with certain conditions, so that the tax agency does not execute on, or take, assets such as bank accounts.
There are times during a Chapter 13 that an event occurs that requires the Chapter 13 Plan of repayment to be modified. When that need arises, it is important to look at the case history as well as the current situation so that the plan may be modified before the bankruptcy is dismissed for problems with the plan. Those problems are often whether the plan is feasible or plan payments have not been made but can be made up. Plan modification might the appropriate remedy.