CAN BANKRUPTCY HELP ME?
If you are over your head in debt, probably the bankruptcy laws
can help you. One of the major aims of the bankruptcy code is to
assist a financially distressed person to get back on his own feet
and become a productive member of society again. Your bankruptcy
case normally results in the discharge or release from obligations
of your debts -- or, at least, of many of them -- so that no further
legal action can be taken against you on those debts. In short, your
discharge in bankruptcy gives you a fresh start.
"But" many people ask, ""Won't I have to give up all of my property
if I file bankruptcy?" The answer is no. Tennessee law recognizes
that some things are necessary for a person's comfort and survival.
Certain property, including your working tools, insurance, household
furnishings, radio, television, musical instruments, some bank,
savings and loan or credit union accounts, your home, and other
property that you own, may be exempt from unsecured creditors --
which means you will be allowed to keep them -- if the value of your
equity in them does not exceed certain amounts, and if proper steps
are taken to claim the exemption. Most debtors have no assets that
exceed the exemption amounts.
Many debtors have purchased cars and other personal property on
installment sales contracts. Such debts are called "secured" and the
exemptions generally do not apply to them. Under the bankruptcy
code, the court must approve any reaffirmation of consumer debt. If
you want to keep the collateral, the court will only approve
reaffirmations that are in the best interest of the debtor. You may
expect that the court will approve , reaffirmation agreements with
secured creditors only if income after bankruptcy allows you to make
the payment in the agreement. Some liens on furniture and household
goods may be avoided by bankruptcy if they were used as security for
a personal loan that was made after you had purchased the furniture
or household goods. Loans made to you to purchase assets normally
may not be avoided.
Debts secured by a mortgage or deed of trust, on your home or other
real estate, generally will not be affected by a liquidation-type
bankruptcy if you have little or no equity in the real estate -- you
will have the choice of keeping the property and paying that debt or
surrendering the home to the lender. If you are seeking to avoid
foreclosure of your home, you should consult an attorney about
filing a Chapter 13 or Chapter 11 bankruptcy case.
Some debts are not discharged by either type of bankruptcy. These
include most taxes, child support, spousal support, most student
loans, and debts resulting from submission of false financial
statements or other similar fraudulent conduct and debts arising
from the willful or malicious injury to another's person or
property. A debtor faced with this type of debt should review his
situation with his attorney to determine the best way to deal with
these debts.
In a Chapter 13 case, the debtor proposes for court approval a plan
to pay all or some part of his debts. The court may approve the plan
if it is proposed in good faith and will result in the unsecured
creditors receiving at least as much as they would receive in a
Chapter 7 bankruptcy case. It must also meet certain other
requirements. These include submission of part of the debtor's
future earnings to a trustee to use in completing the plan. Even
some small businessmen can use Chapter 13 now.
Most of us try to plan our affairs so that debts do not get out of
hand. Sometimes, though, unexpected expenses or losses can upset our
plans. Others of us are just careless. Whatever the cause, if you
find yourself hopelessly in debt, bankruptcy may give you an
opportunity to start over. However, if you have received a previous
Chapter 7 discharge, there is an eight (8) year limit before you may
file for another Chapter 7 discharge. If you had a previous
bankruptcy, there are other time limits that may affect the
protection you receive from filing a Chapter 13 bankruptcy.
There are alternatives to bankruptcy which you should investigate.
Financial counseling is available through Consumer Credit
Counseling. They provide budget counseling and voluntary repayment
programs between clients and creditors. You may contact them at
522-2661. Additionally, you may want to consult with your creditor
about working out a payment plan instead of filing bankruptcy. Most
creditors would rather work something out than force someone into
bankruptcy.
Under recent changes to the law, all debtors must undergo credit
counseling from a court-approved credit counseling provider before
filing for any type of bankruptcy. Each debtor must also undergo a
personal financial management course before becoming eligible for a
discharge in any type of bankruptcy case. A list of these providers
and the cost of the program is available on the Bankruptcy Court
website –– www.tneb.uscourts.gov.
If you want to know more about bankruptcy, as well as the proper
procedure for filing a bankruptcy petition, call back and request
LAWLINE Number 1201, entitled "How Do I File a Bankruptcy Petition?"
