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What exactly is bankruptcy?
Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as "liquidation" or "reorganization."
Under a liquidation bankruptcy (Chapter 7), you ask the bankruptcy court to wipe out (discharge) the debts owed. Under a reorganization bankruptcy (Chapters 11,12, and 13), you file a plan with the bankruptcy court proposing how you will repay your creditors. Some debts must be repaid in full; others you pay only a percentage of the balance due; others aren't paid at all.
Will filing for bankruptcy stop harassing phone calls from bill collectors?
When you file either kind of bankruptcy, something called an "automatic stay" goes into effect. The automatic stay prohibits virtually all creditors from taking any action to collect the debts you owe them unless the bankruptcy court lifts the stay and lets the creditor proceed with collections.
Will I lose my house or apartment?
One of the biggest worries you may face in considering filing for bankruptcy is the possible loss of your home. Though there are a few situations where you may lose your home, keep in mind that bankruptcy is not designed to put you out on the street.
What generally happens in consumer bankruptcy cases?
In a Chapter 7 case, you file several forms with the bankruptcy court listing income and expenses, assets, debts and property transactions for the past two years. The cost to file is $200, which may be waived for people who receive public assistance or live below the poverty level. A court-appointed person, the trustee, is assigned to oversee your case. About a month after filing, you must attend a "meeting of creditors" where the trustee reviews your forms and asks any questions. Despite the name, creditors rarely attend. If you have any nonexempt property, you must give it (or its value in cash) to the trustee. The meeting lasts about five minutes. Three to six months later, you receive a notice from the court that "all debts that qualified for discharge were discharged." Then your case is over.
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