www.CharlesJeromeWare.com. "Here to make a difference."
The following bankruptcy information is excerpted by permission from Chapter 4 of the best-selling book, "LEGAL CONSUMER TIPS AND SECRETS: Avoiding Debtors' Prison in the United States," by Attorney Charles Jerome Ware, former Special Legal and Economic Counsel to the Chairman of the United States Federal Trade Commission (FTC).
Attorney Ware is founder and president of Charles Jerome Ware, Attorneys & Counselors, LLC, a premier Maryland-based nationally-respected and highly-regarded boutique law firm.
Bankruptcy Fundamentals
Bankruptcy is a legal process in the United States that is governed and operated under Federal Law, Title 11 of the United States Code. Bankruptcy is a Federal remedy for debtors to cope with overwhelming debt; to assist individuals and businesses to shed their debt or to organize repayment of their debt under the protection of the bankruptcy court.
In short, there are three (3) types of bankruptcy proceedings:
- Chapter 7 Bankruptcy allows individual and business debtors to eliminate many of their debts in exchange for allowing their nonexempt property or assets to be sold to repay creditors. Chapter 7 Bankruptcy is commonly known as “straight” bankruptcy.
- Chapter 11 Bankruptcy is restricted to companies and allows them to reorganize their debts to remain in business. Chapter 11 Bankruptcy is frequently called “bankruptcy reorganization”.
- Chapter 13 Bankruptcy is restricted to individual debtors and allows them to keep all of their property and arrange a repayment plan. Chapter 13 Bankruptcy is frequently known as “company reorganization” to pay part or all of their debts over a maximum three to five years period.
Some Bankruptcy Tips and Secrets
1. It is true that Chapter 7 Bankruptcy eliminates debts, but it does not necessarily eliminate all debts. For instance, Chapter 7 bankruptcy does not as a rule eliminate (i) child support, (ii) alimony, (ii) most tax debts, (iv) most student loans, (v) and most secured debts. These debts are called exemptions to Chapter 13 bankruptcy.
2. In some situations, Chapter 13 bankruptcy can be helpful in reducing or even eliminating under a repayment plan the exemptions to Chapter 7 bankruptcy in 1 above.
3. Even in Chapter 13 bankruptcy, unsecured debts such as credit card debt that remains after the repayment plan is complete will be discharged (wiped out).
4. Bankruptcy can delay the process but it cannot stop completely a creditor’s repossession of secured property such as houses, cars, etc.
5. Beware that Chapter 7, 11 and 13 bankruptcy usually will not eliminate the so-called “nondischargeable” debts:
(i) debts the debtor forgot or simply failed to list in his or her bankruptcy petition documents; unless the creditor learns of the bankruptcy in time to participate;
(ii) debts for personal injury or wrongful death caused by the wrongful acts (intoxicated driving, for example) of the debtor; and
(iii) fines and penalties imposed against the debtor for violating the law, such as traffic tickets and criminal restitution.
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