Bankruptcy Basics
Presented by: Jason S. Buckingham Attorney at Law www.jsb-law.com
IMPORTANT NOTICE:
This information is provided for general educational purposes only. It is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice about your particular situation.
With the current economic crisis, more and more people are turning to the bankruptcy system to seek relief from unmanageable debt. Even as the rate of bankruptcies is rising, many more people shy away from bankruptcy unnecessarily, often because of a lack of information, or inaccurate information. Bankruptcy for Individuals Chapter 7 ● ● ● ●
Must meet the “means test” - a measure of your disposable income Debtor keeps exempt assets Bankruptcy Trustee sells non-exempt assets (if any) to pay unsecured creditors Debtor can be the buyer of the non-exempt assets
Chapter 13 ● ● ● ●
Reorganization of secured debts, partial to complete discharge of most unsecured debts Regular income required - payment plan from 3 to 5 years Many payments made directly to creditors under the payment plan Must have enough defined “disposable income” to pay the BK Trustee: ● arrears on secured debts like home loans ● unsecured debts equal to the value of non-exempt assets ● BK Trustee's commissions (up to 10% of plan payments) Myths and Facts
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You can keep much of your property: exemptions apply to many types of property, and you can “buy” back non-exempt assets by paying the equity value to the BK Trustee. For property secured by a loan, keeping your loan payments current allows you to keep the property. “I won't be able to get a loan...” ● Late payments have the biggest impact on your credit ● Chapter 13 Debtors can often get loans (with Court permission) during bankruptcy ● For many people, 2 years after a BK discharge, they can get a home loan with the same terms as they would get if they never filed for BK NOT a magic bullet: BK will not fix a person’s spending or saving habits Bankruptcy and Foreclosure
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Chapter 7 can get rid of unsecured debt to reduce foreclosure risk Chapter 13 can allow repayment of arrears and “strip” some junior loans New development: proposed cram down reform to allow BK judges to modify a senior home loan