Leo M. Gibbons, Esquire

MacElree Harvey bankruptcy experts answer your frequently asked questions

Bankruptcy law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. In the United States, there are two main types of bankruptcies, Chapter 7 and Chapter 13. Below, Michael G. Louis, Leo M. Gibbons and Steven A. Riley, three of MacElree Harvey's bankruptcy law experts, answer the most frequently asked questions surrounding bankruptcy law.                      

What is a Chapter 7 bankruptcy?
A Chapter 7 bankruptcy is essentially a liquidation of nonexempt property. A trustee is appointed to take over the debtor's property and any property of value will be sold or turned into money to pay creditors. A person may be able to exempt or keep personal property and possibly real estate depending on the law of the state where you live. Exemptions available to debtors can amount to thousands of dollars in property value.

Who can file a Chapter 7 bankruptcy?
Any individual or business can file a Chapter 7 bankruptcy.

What are the most common reasons for filing a Chapter 7 bankruptcy?
The two most common reasons for filing a Chapter 7 bankruptcy are when an individual loses his or her job and cannot pay his or her bills, or when an individual accumulates large balances on his or her credit cards.

What is a Chapter 13 bankruptcy?
A Chapter 13 bankruptcy is essentially a personal reorganization. The individual can usually keep his or her property, but must earn wages or have some other source of regular income and agree to pay part of his or her income to creditors. The court must approve the repayment plan and budget. A trustee is appointed to collect the payments, pay creditors, and make sure the individual lives up to the terms of their payment plan.

Who can file a Chapter 13 bankruptcy?
Only individuals can file a Chapter 13 bankruptcy; businesses cannot.

What are the most common reasons for filing a Chapter 13 bankruptcy?
The most common reason for filing a Chapter 13 bankruptcy is when an individual falls behind on his or her mortgage. A Chapter 13 plan can be used to catch up on the delinquent mortgage payments.

Does bankruptcy "wipe out" all bills?
Yes and no. A person filing bankruptcy can generally discharge – or be released from – any unsecured debts such as credit card debt. Most secured debts, which are those secured by property, usually a home or car, cannot be discharged unless the property securing the debt is surrendered. Additionally, most taxes, child support, alimony, most student loans, court fines and criminal restitution, and personal injury caused by the debtor while driving under the influence of alcohol or a controlled substance, cannot be discharged.

Can I keep my home after bankruptcy?
If you have a mortgage and you are current on the payments, you will very likely be able to keep your home. If you are behind on your mortgage payments, you must propose a plan to the bankruptcy court that will allow you to repay your delinquency to the mortgage company. Additionally, you must also make all of your current payments while in bankruptcy.

What types of personal property may I keep?
You can generally keep most of your personal property, including, but not limited to, household furnishings, household goods, clothing, items held for personal, family or household use, some jewelry and any items or tools used in your trade or business. You may also be able to keep your car.

Can I keep my credit cards after bankruptcy?
Generally, the credit card companies will cancel your cards upon the filing of bankruptcy. Some credit card companies will allow you to keep your credit card if you agree to reaffirm the debt. When you reaffirm a debt, you agree that it will not be discharged by your bankruptcy and that you will pay the debt back.

I am married; does my spouse also have to file bankruptcy?
No. The bankruptcy law does not require you to file a joint bankruptcy with your spouse. You can either file individually or, if you choose, with your spouse.

Are there any alternatives to bankruptcy?
Yes. You can attempt to enter into a payment plan with your creditors or can attempt to negotiate the payoff of debts with certain creditors for a one-time lump sum payment at something less than the face value. You can also consult a consumer credit counseling agency for help in formulating a plan to pay off your debt outside of bankruptcy.

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