Bankruptcy Is a Federal Court Procedure.  When people or companies cannot pay their creditors, they may seek a fresh start through complete debt relief or to rearrange payments to creditors through a court-monitored payment plan.  There are two basic types of bankruptcies for individuals.  One is Chapter 7, where all debts may be canceled.  Another kind of bankruptcy is a Chapter 13, where debts or a percentage of debts are repaid over a three to five-year plan.  If you do not own a home or car and your expenses are greater than your income, a Chapter 7 Bankruptcy might be the best option.  If you do own a home or car and are behind in your payments, your best option may be a Chapter 13 Bankruptcy.
 
A Chapter 7 Bankruptcy can completely wipe out most secured and unsecured debts.  State exemptions allow you to keep some or all of your property.  If you have property above and beyond the state exemptions, the Court may sell that property to pay your creditors.  A Chapter 13 Bankruptcy would allow you to keep your property while you pay off your debts over a three to five-year period.
 
Bankruptcy Petition:  A bankruptcy petition will be filed on your behalf.  This petition will include information and lists concerning your debts, assets, and income information for the past three years.  The filing fee for a Chapter 7 Bankruptcy is $299.00.  For a Chapter 13, it is $274.00.
 
Exemptions:  State laws provide that you are entitled to keep certain types of property such as pensions or retirement plans, and property up to a specified dollar value.  If you have property that is non-exempt, the bankruptcy court may order that it be sold and the proceeds be distributed to creditors.
 
Automatic Stay:  Once your Bankruptcy Petition has been filed, an automatic stay goes into effect, prohibiting creditors from pursuing you or your property outside of the bankruptcy proceeding.  All wage garnishments are stopped by the automatic stay.
 
Court Attendance:  Usually, you will only be required to attend one court hearing.  This is called the Section 341 Meeting of the Creditors, and it usually takes place about 30 days after the filing of your petition.  You must bring your License and Social Security Card with you to the meeting.  At this informal hearing the Bankruptcy Trustee will ask you questions about your bankruptcy petition.  Some creditors may choose to attend and ask questions of you.  Usually, this hearing lasts approximately ten minutes.  If your Bankruptcy is complicated, or if formal objections have been filed, you may be required to attend additional hearings.
 
Secured Creditors:  A creditor is secured if you have pledged property such as your home, car, or even furniture as collateral.  If the secured claim is not paid or the loan has not been reaffirmed, the bankruptcy court will allow the creditor to repossess the property that was pledged as collateral.
 
Reaffirming Debts:  If you have recently purchased a home or a car, you can choose to Reaffirm your loan obligation.  You can Reaffirm your loan by signing an agreement that basically means you wish to keep the loan in spite of your bankruptcy petition.  This allows you to keep your home or car as long as you keep current with your monthly payments.  You may also be able to keep certain credit cards if the company agrees to reaffirm your account.
 
Unsecured Creditors:  A creditor is unsecured if you have not pledged anything as collateral.  Typically, unsecured debts include credit cards and medical bills.  Usually, unsecured debts are wiped out completely by a Chapter 7 Bankruptcy.
 
Discharge of Debts:  Approximately sixty (60) days after your Meeting of Creditors, the Court may discharge your debts.  If a debt has been discharged, you no longer are responsible for that debt.
 
New Dischargeable Debts:  All debts are not dischargeable under Chapter 7 Bankruptcy.  Non-dischargeable debts include:

• Money Owed for Taxes
• Fraudulent Debts
• Child Support and Alimony
• Some Student Loans
• Intentional Torts and Injuries Caused by Drunk Driving

Fraud:  The court will not discharge any debts that were incurred within 180 days of the filing of your petition.  Also, you cannot transfer property to relative or friends in an attempt to hide your assets.  These types of actions can cause the Bankruptcy Court to dismiss your bankruptcy.
 
Credit Report:  A bankruptcy is usually reported on your credit report for approximately ten years after your discharge.
 
Eight Years:  You cannot be discharged under a Chapter 7 Bankruptcy if you have previously filed a Chapter 7 Bankruptcy within the past eight years.
 
Debtor Education:  All persons who file bankruptcy are required to take a Debtor Education course prior to filing.  Also, a financial management course must be taken immediately after the Meeting of Creditors.  Without both of these courses being completed, you will not be able to file your bankruptcy, and you will not receive your discharge.