BANKRUPTCY

What is Bankruptcy?

A bankruptcy is a legal action, usually filed in federal court, which you may use when you cannot pay your bills as they come due. It is a process where your debts are valued and you are either asked to pay your debts over time or give up certain assets in return for cancellation of your debts.

Where are the Bankruptcy laws found?

They are contained in federal law, specifically Title 11 of the United States Code. There are also local rules of bankruptcy procedure.

When should I consider filing a Bankruptcy?

You should consider filing bankruptcy when you cannot pay your bills or when a particular crisis, such as an illness, accident or loss of employment makes the future payment of your bills very unlikely. Also, if a judgment is handed down against you, a bankruptcy may be used to stop the creditor from attaching your assets or wages.

Are there different types of Bankruptcies?

Yes. Bankruptcies are divided into types, also called Chapters. The four most common Bankruptcy Chapters are 7, 11, 12 and 13. Chapter 7 and Chapter 13 Bankruptcies are most commonly referred to as Consumer Bankruptcies. The charts below provide comparisons for both Chapter 7 and Chapter 13 bankruptcy filings.

Advantages to Chapter 7

Disadvantages to Chapter 7
  • Will take only 4-6 months
  • Usually requires only one court trip
  • Can file if below state median income
  • Lose all property that is not exempt
  • Will affect ability to obtain credit in the future
  • Cannot get another Chapter 7 discharge for 8 years

Advantages to Chapter 13

Disadvantages to Chapter 13
  • Get to keep most or all of your property
  • Pay off back taxes and reduce or negotiate interest from accruing on debt
  • Can stop a house foreclosure (make up missed payments over 3 to 5 years and and keep or attempt ot sell the house)
  • Pay off most of debt and attain a fresh start at end of 3 to 5 years
  • Complex with multiple court appearances
  • If payments to trustee are missed, case will be dismissed, no discharge and advantages lost
  • Must live under strict budget based on IRS standard for living expenses for 3-5 years buying only essential items. MOST people fail to complete the plan.
  • Not able to receive discharge if prior chapter 7 discharge within 4 years or prior chpater 13 discharge within 2 years

Can Bankruptcy stop collection of taxes?

It depends. Taxes are normally given priority and are difficult to erase. Bankruptcy will initially stop the collection process but may not eliminate the obligation to pay the taxes.

Does a Bankruptcy affect my credit?

Yes. Future lenders may consider your bankruptcy when they are deciding whether to loan you money or credit. However, certain laws exist to prevent unlawful discrimination against you just because you filed for bankruptcy. The fact that you have filed for bankruptcy may be carried on your credit records for 10 years or longer in many cases.

If I choose Chapter 7 liquidation, do I lose all my assets?

No. Bankruptcy law lets individual debtors keep certain property that is not subject to attachment and execution under state law. These assets include some or all of the debtor's equity in his or her homestead, household goods, a car, certain retirement plans and numerous other assets. If you do have equity in assets that are not exempt, your bankruptcy trustee may sell these assets and distribute the proceeds to your creditors.

How do I file Bankruptcy and what happens to me after I do it?

The filing of any type of bankruptcy petition requires that you prepare petition and schedules that list all of your assets and liabilities. You are also required to disclose your current income and monthly expenses. You must also answer numerous questions regarding your financial affairs - such as any transfers of your assets that you have made within two years before your bankruptcy. When these documents are completed, they are e-filed with the Bankruptcy Court. Alikhan Law Office, LLC provides a legal analysis for your case, explains which exemptions you are eligible for and prepares your petitions, schedules and applicable plan on cutting edge software.

After the documents are filed, a bankruptcy trustee is appointed to administer your case. You are required to provide all of your creditors with notice that you have filed bankruptcy. This form advises your creditors of certain things that they may and may not do during your bankruptcy case.

What is the cost to file a Bankruptcy?

The filing cost differs based upon the Chapter of Bankruptcy you file. Currently, fees are $299 for a Chapter 7, $830 for a Chapter 11, and $274 for Chapter 13. You may also have to pay quarterly fees to the United States Trustee.

How long does a Bankruptcy take?

Chapter 7 bankruptcies require you to attend a meeting of creditors. If no objections are filed, the discharge can be entered in approximately 90 days. Chapter 13 bankruptcies take 48 months and may involve a number of hearings over an extended period with both the trustee and the court.

SOURCE: STATE BAR OF NEVADA

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