Bankruptcy is a legal process designed to help individuals and businesses eliminate overwhelming debts under a bankruptcy court's protection. Personal bankruptcies typically fall under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. At Kallio Law, we help clients through both Chapter 7 and Chapter 13 bankruptcy processes.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a “liquidation” bankruptcy that wipes most of your debts clean, giving you a fresh start. If your monthly income is under a certain amount, you may be able to utilize Chapter 7 bankruptcy to eliminate many of your unsecured debts. A trustee collects all of your assets and sells or liquidates all of your assets that aren't exempt. Then the trustee uses the proceeds to pay your debts to the extent possible. The process normally takes four to six months.
You can keep certain secured debts, like your home, furniture, or car, if you reaffirm these debts. Once you do this, you can't discharge those debts in bankruptcy for another eight years. You have to continue to pay those debts just as if you'd never gone through bankruptcy proceedings. You will also need to catch up on payments if you've fallen behind.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is “consolidation” or “reorganization” bankruptcy. A trustee reorganizes your debt into a repayment plan over three to five years. You will pay your bankruptcy trustee a monthly payment, and the trustee allocates the funds to your repayment plan. Chapter 13 involves a more complicated personal bankruptcy plan, and the process takes longer. You also need a skilled bankruptcy attorney to assist you through the process.
Debts You Can't Discharge
Bankruptcy cannot discharge all of your debts in some cases. You can't discharge:
- Unpaid child support, alimony, or other debts related to family support;
- Debts incurred for personal injury or death caused while driving while intoxicated;
- Fines for breaking the law, including traffic tickets and restitution;
- Student loan debt, unless it would be a hardship for you to repay it;
- Income tax debts incurred within the last three years and all other tax debts;
- Debts you fail to list in a bankruptcy petition.
In some cases, a bankruptcy judge may order some of your debts non-dischargeable if the creditor challenges their discharge in court, including:
- Debts you incurred by fraud;
- Credit purchases of $1,150 or more within 60 days of filing for bankruptcy;
- Loans or cash advances of $1,150 or more taken within 60 days of filing for bankruptcy;
- Debts from willful or malicious damage to someone's property;
- Debts from embezzlement, stealing, or breach of trust; and
- Debts you owe from a divorce or settlement unless you still wouldn't be able to afford them after bankruptcy or the benefit you'd receive from the discharge would outweigh the harm to your ex-spouse.
If you're facing bankruptcy, it doesn't have to mean financial devastation. At Kallio Law, we can discuss your options and help you through the process.