What You Should Know About Bankruptcy
January 4, 2013 By Law Offices of Marshall D. Schultz
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The average person knows little about bankruptcy, but many have heard common bankruptcy myths floating around. If you are drowning in debt, this is what you should know about the bankruptcy basics.
The financial crisis of 2007 to 2008, also known as the global financial crisis and the 2008 financial crisis has directly impacted millions of American families; many financial economists have considered this the greatest financial crisis since the Great Depression in the 1930’s. The financial crisis resulted in the bailout of banks by our government, the stock market suffered around the world, and the housing market suffered, especially in the sunshine states such as California, Florida, Nevada and Arizona, resulting in evictions and foreclosures in these states and nationwide.
The housing bubble peaked in 2006, and then subsequently burst, thus plummeting values of securities tied to U.S. real estate pricing, damaging U.S. financial institutions nationwide. The financial crisis, coupled with peak unemployment rates, layoffs and steep contract concessions to those who remained at work, all contributed to economic hardship for American families. Many Americans have found themselves in situations they never dreamed they would be in thanks to the economic downturn.
While the nation attempts to rebuilds itself and licks its wounds, many have fallen off the financial ladder with no hopes for climbing back up. For those who have become bogged down by underwater mortgages, overwhelming debt that includes exorbitant mounting interests and penalties, it may be high time to consider their debt relief options.
Bankruptcy law is uniquely designed to help people who are no longer “able” to pay off their creditors, and give them the ability to regain a fresh financial start, and wipe their slate clean. This is accomplished by liquidating their assets in order to pay their debts or by creating a sound repayment plan. Bankruptcy law also provides protection for troubled businesses so they can keep their doors open and remain afloat while their profits are orderly distributed to their creditors through either reorganization or liquidation.
Most consumer bankruptcies are filed under a Chapter 7 or a Chapter 13 bankruptcy. The Federal courts are considered to have exclusive control over bankruptcy petitions; therefore, bankruptcies cannot be filed in state courts. There is a bankruptcy court in each judicial district and each state has one or more bankruptcy courts; there are 90 bankruptcy districts in all in the United States.
The court official that has the power to decide upon federal bankruptcy cases is the United States bankruptcy judge, who is a judicial officer that works in the United States district courts. He or she can determine eligibility, and whether or not a debtor should receive a discharge of their debts. Since the majority of bankruptcy cases involve paperwork, Chapter 7, and 13 cases are generally administered by what is called a bankruptcy trustee, and he or she is appointed to each individual bankruptcy case. If you ultimately file for bankruptcy, a bankruptcy trustee will be appointed to your case and you will meet with him or her at least once during your proceedings.
In a 1934 decision issued by the Supreme Court in Local Loan Co. v Hunt, 292 U.S. 234,244 (1934), the decision stated, “This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. “
What is a discharge in bankruptcy? It releases the debtor from any personal liability for certain qualifying debts, this means that once certain debts have been discharged or “wiped out,” the creditors are prohibited from taking any kind of collection actions against the debtor for those discharged debts.
The creditor also can’t communicate with the debtor by making phone calls or sending letters, nor can they make any personal contacts with the debtor. While the debtor is not held responsible for discharged debts, valid liens (debts that are secured by property for payment) that could not be included in the bankruptcy case will remain after the bankruptcy. This means that a secured creditor may go ahead and enforce the lien and recover the property that was secured by the lien; common examples are homes and automobiles, particularly in Chapter 7 bankruptcy cases.
Not all debts can be discharged in a Chapter 7 bankruptcy, these include: child support, alimony, court ordered fines, victim restitution, most student loans, and personal injury settlements involving an accident with a driver impaired by drugs or alcohol. For more detailed information about bankruptcy, contact an attorney to discuss your debt relief options.
ABOUT THE AUTHOR: Law Office of Marshall D. Schultz
The Law Offices of Marshall D. Schultz is a bankruptcy law firm located in Detroit, Michigan. The attorneys at the firm have over 33 years of combined experience and have handled more than 10,000 consumer bankruptcies in Michigan. The firm focuses on Chapter 7 and Chapter 13 consumer bankruptcies along with collections and foreclosure defense, and alternatives to bankruptcy.
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More information about Law Offices of Marshall D. Schultz
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
The housing bubble peaked in 2006, and then subsequently burst, thus plummeting values of securities tied to U.S. real estate pricing, damaging U.S. financial institutions nationwide. The financial crisis, coupled with peak unemployment rates, layoffs and steep contract concessions to those who remained at work, all contributed to economic hardship for American families. Many Americans have found themselves in situations they never dreamed they would be in thanks to the economic downturn.
While the nation attempts to rebuilds itself and licks its wounds, many have fallen off the financial ladder with no hopes for climbing back up. For those who have become bogged down by underwater mortgages, overwhelming debt that includes exorbitant mounting interests and penalties, it may be high time to consider their debt relief options.
Bankruptcy law is uniquely designed to help people who are no longer “able” to pay off their creditors, and give them the ability to regain a fresh financial start, and wipe their slate clean. This is accomplished by liquidating their assets in order to pay their debts or by creating a sound repayment plan. Bankruptcy law also provides protection for troubled businesses so they can keep their doors open and remain afloat while their profits are orderly distributed to their creditors through either reorganization or liquidation.
Most consumer bankruptcies are filed under a Chapter 7 or a Chapter 13 bankruptcy. The Federal courts are considered to have exclusive control over bankruptcy petitions; therefore, bankruptcies cannot be filed in state courts. There is a bankruptcy court in each judicial district and each state has one or more bankruptcy courts; there are 90 bankruptcy districts in all in the United States.
The court official that has the power to decide upon federal bankruptcy cases is the United States bankruptcy judge, who is a judicial officer that works in the United States district courts. He or she can determine eligibility, and whether or not a debtor should receive a discharge of their debts. Since the majority of bankruptcy cases involve paperwork, Chapter 7, and 13 cases are generally administered by what is called a bankruptcy trustee, and he or she is appointed to each individual bankruptcy case. If you ultimately file for bankruptcy, a bankruptcy trustee will be appointed to your case and you will meet with him or her at least once during your proceedings.
In a 1934 decision issued by the Supreme Court in Local Loan Co. v Hunt, 292 U.S. 234,244 (1934), the decision stated, “This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. “
What is a discharge in bankruptcy? It releases the debtor from any personal liability for certain qualifying debts, this means that once certain debts have been discharged or “wiped out,” the creditors are prohibited from taking any kind of collection actions against the debtor for those discharged debts.
The creditor also can’t communicate with the debtor by making phone calls or sending letters, nor can they make any personal contacts with the debtor. While the debtor is not held responsible for discharged debts, valid liens (debts that are secured by property for payment) that could not be included in the bankruptcy case will remain after the bankruptcy. This means that a secured creditor may go ahead and enforce the lien and recover the property that was secured by the lien; common examples are homes and automobiles, particularly in Chapter 7 bankruptcy cases.
Not all debts can be discharged in a Chapter 7 bankruptcy, these include: child support, alimony, court ordered fines, victim restitution, most student loans, and personal injury settlements involving an accident with a driver impaired by drugs or alcohol. For more detailed information about bankruptcy, contact an attorney to discuss your debt relief options.
ABOUT THE AUTHOR: Law Office of Marshall D. Schultz
The Law Offices of Marshall D. Schultz is a bankruptcy law firm located in Detroit, Michigan. The attorneys at the firm have over 33 years of combined experience and have handled more than 10,000 consumer bankruptcies in Michigan. The firm focuses on Chapter 7 and Chapter 13 consumer bankruptcies along with collections and foreclosure defense, and alternatives to bankruptcy.
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More information about Law Offices of Marshall D. Schultz
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
