Bankruptcy FAQS
What is a Debtor?
In its most basic form, a debtor is a person who owes someone else money. A creditor is the person who is owed money. For example, If John loans Mary fifty dollars, then John is the creditor of Mary, and Mary is the debtor or John.
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What is Bankruptcy?
Bankruptcy is the legal method for a debtor to "discharge" or relieve himself of the debts that he owes. While no debtor is guaranteed a total discharge of his debt, most debtors who file for bankruptcy are given such relief. One of the primary purposes of the bankruptcy act is to relieve the honest debtor from the weight of oppressive indebtedness and to provide the debtor with a fresh start.
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Who can file for bankruptcy?
Any person can file for bankruptcy protection from creditors. In addition, most businesses and charitable organizations may also qualify for bankruptcy protection.
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What happens to my bills after I file for bankruptcy?
As soon as your case is officially filed with the court, creditors are legally prevented from attempting to collect on any debt owed to them by you. This means that creditors must stop all collection activity, including: telephone calls, harassing letters, repossessions, foreclosures, lawsuits, and wage garnishments. Once the case is concluded, the court may enter a "discharge". A discharge is a total release of a debtor from any further personal liability for his or her pre-bankruptcy debts.
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What is the difference between Chapter 7, 11, and 13 bankruptcy?
In a typical Chapter 7 bankruptcy (also known as liquidation), a trustee collects the nonexempt property of the debtor, converts the property to cash, and distributes the cash to the creditors. In contrast, Chapters 11, 12, and 13 of the Bankruptcy Code contemplate debtor rehabilitation. In a rehabilitation case, creditors look to future earnings of the debtor, not to the current property of the debtor. Under rehabilitation, a debtor will generally retain his assets and property, while making payments to creditors pursuant to a court approved plan.
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Will filing bankruptcy effect my credit rating?
Unfortunately it will. However, most individuals are able to rebuild their credit within a few years. If you are currently contemplating bankruptcy, then it is likely that your current credit rating has already been effected. A discharge of your current debt may provide the opportunity to rebuild your credit with steady, regular payments on a new account.
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How long will a bankruptcy show on my credit reports?
The Fair Credit Reporting Act prohibits the reporting of outdated information about consumers. With a few exceptions, credit-reporting agencies can only disclose a bankruptcy during the first ten years following a filing.
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Will I lose my house, car, and other personal property?
Not necessarily, each state has laws that determine which items or property are exempt from being taken away. For example, many states exempt personal items such as furniture and clothing. In addition, other kinds of property are exempt up to a limit. These exemption limits mean that any equity that you have in the property above the limit is not exempt. The Bankruptcy Court can take the property and sell it, pay off any creditors, give to you the exemption amount, and keep the rest for other creditors.
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Should I file for bankruptcy?
There is never a quick answer to this question. Generally, if you can pay off your debts within three to five years then filing for bankruptcy is not a good idea. If this is not possible, then filing may be a viable solution to eliminate your financial obligations. However, before filing for bankruptcy, it is advisable to explore alternative routes. In some circumstances, creditors may be willing to work out repayment plans or lower their interest rates. In addition, some creditors may be willing to settle your account for less than is owed. Filing for bankruptcy should be viewed as a secret weapon of last resort.
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SHEILA GROPPER NELSON
Attorneys at Law
456 Montgomery St., Suite 1700, San Francisco, CA 94104
Telephone: 415-362-2221
Fax: Available Upon Request
Email: shedoeslaw@aol.com
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