Is Bankruptcy Right For You?
Bankruptcy can provide individuals or businesses with a fresh start. In a time when millions of jobs are being lost, the Bankruptcy Code provides a safety net to individuals and businesses so they can get on with their lives. In many cases, bankruptcy can help stop collection efforts on judgments (including garnishments and levies), repossessions, and foreclosures. Bankruptcy can also help eliminate credit card bills, medical bills, and many other dischargeable debts.
This page provides information to let you understand your options as well as the costs and benefits of filing bankruptcy. However, bankruptcy is a complicated field and this page is not intended as a substitute for the advice of an attorney. It is highly recommended that you contact a bankruptcy attorney if you are considering bankruptcy.
Common Questions about Bankruptcy
- What is bankruptcy?
- What are the benefits of filing bankruptcy?
- How much does bankruptcy cost?
- Can I keep the things I own if I file Bankruptcy?
- Will bankruptcy affect my credit?
- Will bankruptcy stop a garnishment of my wages?
What is Bankruptcy?
Bankruptcy is a legal proceeding under the federal Bankruptcy Code (11 U.S.C. § 101 et seq.) that is meant to individuals with a “fresh start.”
There are three common types of bankruptcy, each named after the chapter of the Bankruptcy Code that defines them:
Chapter 7. Chapter 7 bankruptcy (also known as liquidation) allows an individual or business to eliminate virtually all unsecured debts. The debtor is allowed to keep certain exempt property and all non-exempt property is sold for the benefit of the creditors (what property a debtor can keep is outlined below). Most individuals file for chapter 7 bankruptcy.
Chapter 11. Chapter 11 bankruptcy (also known as reorganization) gives businesses or individuals short-term relief from creditors in order to negotiate a plan of reorganization with creditors.
Chapter 13. Chapter 13 bankruptcy is an alternative to chapter 7 bankruptcy. Chapter 13 bankruptcy is designed for wage earners with relatively small amounts of consumer debt (as opposed to business debt). One of the main advantages of chapter 13 bankruptcy is that the debtor generally loses no property. Chapter 13 bankruptcy can also avoid collection efforts against co-signors and joint debtors.
What are the benefits of filing bankruptcy?
Bankruptcy provides two main benefits:
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Immediate Protection from Creditors. Whether you file for bankruptcy under chapter 7, 11, or 13, you are protected by the automatic stay. The automatic stay is a powerful concept. Generally creditors must immediately halt all debt collection or repossession activities. Similarly, all lawsuits against you must stop.
Of course, there are limits on the automatic stay. For example, the automatic stay usually does not postpone criminal actions against the debtor, divorce proceedings, or eviction actions. If you have questions about what types of proceedings bankruptcy can stop, you should contact a bankruptcy attorney for a free consultation.
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Discharge of Debts. Bankruptcy also allows a debtor to eliminate certain debts. Debts in bankruptcy are considered either dischargeable or non-dischargeable. Most debts in bankruptcy are dischargeable. Dischargeable debts often include credit card debts, medical bills, or judgments against you. Some debts, however, are non-dischargeable. An experienced bankruptcy attorney can provide further information as to which debts you can eliminate.
How much does bankruptcy cost?
The cost of bankruptcy includes the filing fee plus the cost of any legal representation that you require. Each chapter of bankruptcy has a different filing fee. For a chapter 7 bankruptcy in the district of Minnesota, the fee is $299.
The cost of legal representation depends on the type of bankruptcy and the complexity of your case. My fees start at $950 for a no-asset chapter 7 and $1,950 for a chapter 13
Can I keep the things I own if I file Bankruptcy?
State and federal exemptions can be used to protect the things you own during bankruptcy. Exempt property may include your house, your car, and other belongings, up to a certain value.
In chapter 7 bankruptcy, property that is non-exempt might be sold to pay off creditors. A debtor in chapter 13 bankruptcy will usually have to pay a percentage of the value of non-exempt property that the debtor wants to keep.
If you have questions about whether you can keep a particular piece of property, you should contact a bankruptcy attorney for more information.
Will bankruptcy affect my credit?
Yes, bankruptcy will affect your credit to some degree. A bankruptcy will stay on your credit report for 10 years. Initially, bankruptcy will also lower your credit rating. However, when the debt is discharged, your debt to income ratio may come back into alignment. Furthermore, you may avoid late payments on those discharged debts. For those reasons, many people’s credit scores actually increase after bankruptcy.
Will Bankruptcy Stop Garnishments?
Almost without exception, the answer is yes. Creditors generally must stop all collection activities (including garnishment) because an automatic stay is imposed when you file for bankruptcy. The biggest exception is for child support payments. For most other types of garnishment, bankruptcy will provide immediate relief.
Attorney Michael A. Weber represents individuals and businesses who need a fresh start. Please contact Michael A. Weber today for a free consultation.
