WHAT IS BANKRUPTCY?
The filing of a petition for relief under the Bankruptcy Code commences a legal proceeding, referred to as a bankruptcy case. Any disputes in your case will be heard by a bankruptcy judge in federal bankruptcy court. Bankruptcy provides debt-strapped individuals with a fresh start. The filing of a bankruptcy case immediately stops all creditor calls and harassment due to the automatic stay provided by the bankruptcy filing. In bankruptcy, if you are eligible, you will receive a discharge which eliminates your legal obligation to pay most of your debts with exceptions such as certain taxes, domestic support obligations, and reaffirmed debts.
WHAT TYPE OF DEBT CANNOT BE DISCHARGED IN BANKRUPTCY?
While a discharge in bankruptcy affords debtors a “fresh start” by eliminating the legal obligation to pay most debts, there are some debts that cannot get discharged in bankruptcy. Below are the most frequent types of debt that will survive a bankruptcy discharge:
1. Domestic support obligations such as child support or maintenance 2. Income tax liability less than 3 years old and trust fund taxes (regardless of date incurred) 3. Student loans (unless qualify for hardship discharge) 4. DUI fines and penalties 5. Debts arising from fraud
PREPARING TO FILE FOR BANKRUPTCY It is a very common misconception that filing for bankruptcy is just a matter of signing some simple paperwork. To the contrary, bankruptcy schedules involve listing all assets and liabilities, contracts, codebtors, and current income and expenditures. If you file a bankruptcy, you will also be required to turn over documents to the Trustee appointed in your case including copies of all mortgages, notes, car titles, bank statements, and pay stubs among other items. Assembling all these documents and gathering information about your assets and liabilities can be a time consuming process. As a result, if you are in need of bankruptcy assistance, you should promptly seek legal counsel. If you wait until the day before a foreclosure sale or are facing garnishment, you may not have sufficient time to file for bankruptcy relief. There are skeletal bankruptcy filings that are available to debtors who have emergencies, but it is very difficult for a debtor to get a complete analysis of the risks and consequences of filing when the time frame for filing is so brief. CREDIT COUNSELING: A CONSUMER BANKRUPTCY REQUIREMENT Due to the Bankruptcy Abuse Prevention Act of 2005, individuals who file for personal bankruptcy protection must get credit counseling (with limited exceptions) from a government approved organization within six months of the filing for bankruptcy relief. You should complete the counseling at least 24 hours before you file for bankruptcy relief. Upon completion of the credit counseling, the organization will provide you a certificate. If more than six months has passed since you completed credit counseling, you will need to retake the credit counseling course before you file. After you file for consumer bankruptcy relief, as a debtor you will also be required to take a debtor education course in order to receive a discharge. If you fail to complete the postfiling debtor education course, your case will be closed without discharge and you will have to reopen the case and file proof of debtor education completion in order to receive a discharge.