What is Bankruptcy? Will it get rid of all my debt?
For answers to general questions, check out the Bankruptcy FAQ
Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Most bankruptcies fall under Chapter 7 “liquidation” or Chapter 13 “reorganization”. To understand the difference between Chapter 7 and Chapter 13, check out Chapter 7 vs Chapter 13. In a Chapter 7, the debtor is seeking a discharge to wipe out, or eliminate debts. In a Chapter 13, the debtor proposes a Plan in which some, or all creditors are paid back in a 3 – 5 year time period.
The Automatic Stay goes into effect immediately upon filing a Chapter 7 or 13. The automatic stay is perhaps the most powerful tool at the debtors disposal, as it “stays”, or stops your creditors from attempting to collect a debt. When you see advertisements that tell you bankruptcy will stop creditors from calling you, sending you mail, stop garnishments, repossessions and foreclosures, they are talking about the automatic stay.
Will Bankruptcy get rid of all my debt?
Most people get relief under the Bankruptcy Code; however, certain debts will never go away. For more information see Debts That Can Follow You to Your Grave. Generally speaking, debts that are discharged, or wiped out, include credit cards, medical bills, utilities, repossession deficiencies, certain tax debts. Civil Judgments can also be wiped out if the underlying debt was dischargeable, such as an old landlord suing for past due rent, or a collection company suing for an old credit card.
Chapter 7 vs 13 – Which one is right for me?
To understand which chapter may be right for you, take a look at Chapter 7 vs 13. A quick answer; however, is this: if you are behind on a car payment, facing foreclosure, getting garnished and have no way to save up money for a Chapter 7, then you may want to consider Chapter 13. A Chapter 7 is great if you have medical bills, credit cards, etc and you have the ability to pay upfront. It is important to understand that no website will be able to definitively answer this question. You really need to speak to a lawyer who does this for a living.
To Learn More About Bankruptcy, Call Chris W. Steffens, a Kansas Licensed Bankruptcy Lawyer