Navigating The Maze Of Bankruptcy
Many people find themselves, at some point in their lives, drowning in debt and looking for a way to get back on even ground. It’s a common misunderstanding that bankruptcy will wipe out your debt and give you a completely fresh start. If you’re struggling with debt and considering filing bankruptcy, it’s important to understand what bankruptcy can and can’t do for you. In some circumstances, it offers a way for someone to get enough breathing room to catch up. It depends upon the type and amount of debt you need help getting under control and your level of income.
Bankruptcy is a federal provision, and is handled through federal courts. Individuals (as opposed to businesses) can file one of two types of bankruptcy. In Chapter 7 bankruptcy, the debtor agrees to the liquidation of their property and have the proceeds distributed among their creditors. Chapter 7 provides for the debtor to keep part of the property and or proceeds through a complicated set of exemptions. In Chapter 13 bankruptcy, the debtor gets an adjustment to certain debts and makes a repayment plan which can reset the clock on past-due debts and reduce monthly payments.
Filing bankruptcy in California offers the opportunity to use some additional exemptions, beyond the standard federal exemptions. There are also a number of debts that debtors cannot get rid of, regardless of filing bankruptcy; these are called non-dischargeable debts. These include:
- Any child support, alimony, or other family support debts you are behind on
- Debts from any personal injury or death caused by a DUI incident
- Students loans (there is an exception for undue hardship)
- Fines and penalties for traffic tickets, criminal restitution, and other violation of the law
- Tax debts from the past 3 years
- Debts not specifically listed in the bankruptcy filing
If you’re filing Chapter 7 bankruptcy, each of your creditors may, in specific circumstances, challenge your request for the court to discharge the debt you owe them. It’s up to the judge overseeing your case to decide whether or not to allow those challenged debts to be discharged. The debts that can be challenged are:
- Debts incurred on the basis of fraud
- Any luxury goods or services exceeding $1,150 and purchased on credit within 60 days of filing bankruptcy
- Cash advances or loans of $1,150 or more made within 60 days of filing bankruptcy
- Restitution debts arising from willful or malicious injury to a person or damage to property
- Debts owed because of larceny, embezzlement, or breach of trust
- Debts owed by divorce decree or settlement. There are some very specific exceptions under which a debtor could ask the judge to deny this challenge.
Bankruptcy Is Not A DIY Project
Bankruptcy is an intricate machine with lots of moving parts that can really hurt you if you get caught in them. If you are struggling with debt and considering filing, contact the Law Offices of Kevin Cortright for a free consultation. We’ll help you figure out whether it is the best solution for your specific situation, and which type of filing makes most sense for you. If you decide to go a