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What is bankruptcy?


Bankruptcy is a process. It a legal system a person or business that is unable to repay their debts starts so they can legally  modify the debt they owe through the bankruptcy court system.

What are the different types of bankruptcy? Which will work for me?


There is more than one sort of bankruptcy, and which one will “work” for you depends on what the goal is. Is it to hold onto a house or car? To stop wage garnishment? To pay back taxes?


Chapter 7 refers to the chapter of the Bankruptcy Code providing for liquidation - the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors. The court will evaluate the debtor's income and expenses to determine if the debtor may proceed under Chapter 7.  What is and is not exempt is written out in the bankruptcy code, and you will want to know want is exempt or not before you file any sort of bankruptcy.


Chapter 11 bankruptcy involves the reorganization of a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time, meaning the business will change the repayment agreements to a schedule the business can pay, rather than the original agreement.


Chapter 12 refers to the chapter of the Bankruptcy Code providing for adjustment of debts of a "family farmer." IT let the farmer pay the debts according to a plan, rather than the original agreement.


Chapter 13 provides for the adjustment of debts of an individual with regular income, and income is whatever money the debt gets regularly, not just wages.. Chapter 13 allows a debtor to keep property and income to pay debts over time, usually three to five years.


How long will bankruptcy stay on my credit report?


A Chapter 7 bankruptcy (liquidation of debts) will generally stay on your credit report for 10 years.


A Chapter 13 bankruptcy (wage-earner plan) will generally stay on your credit report for 7 years from the date of filing.


What property is included in bankruptcy?


When you file Chapter 7 bankruptcy, it typically includes liquidation of all nonexempt assets. Vehicles, work-related tools and household furnishings may be considered exempt, but your other property may be considered nonexempt, and can be turned over to your creditors or sold by a trustee.


If you file Chapter 13, you usually are able to keep f your assets, as long as you maintain steady income and continue to make your agreed-upon payments.


What debts can't be included in bankruptcy?


Some debts are not dischargeable in bankruptcy, including most student loan debt, back taxes less than three years old, alimony, child support, and debts incurred through fraud. But this is a general statement, and each situation is different, so don’t assume a debt cant be discharged just because it's in the list.


How will bankruptcy impact by spouse or cosigner?


While you can certainly file bankruptcy as an individual, if you are married and both of you have significant debt, you may consider filing a joint petition for bankruptcy.


If you file separately, only your own debts will be discharged. Therefore, if your spouse has debt that isn't in your name, those will not be impacted. For joint accounts, your debt may be discharged, but the lender can still try to collect from your spouse.


The same is true for a cosigner. If you had a family member or friend cosign on a loan for you, even if the loan is discharged for you, it will not be discharged for your cosigner. The lender will require your cosigner to pay the entire remaining balance of the debt.


Check out our the new student loan law in New Jersey for some information of cosigners rights in student loans agreements.

What's pre-filing bankruptcy counseling?


Getting a bankruptcy counseling certificate is required to file  for personal bankruptcy. It can be gotten online or over the phone after participating in the counseling, also online or on the phone. This is a link to a counseling agency that isn’t very expensive.