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Debt consolidation is an alternative. The debtor must contact a credit counseling service that can help consolidate debts. Also the debtor must choose between the different bankruptcy chapters. While Chapter 7 is the most common, a debtor with regular income should consider Chapter 13. Chapter 13 allows debtors to keep their assets. A small business owner or sole proprietor should consider Chapter 11.
Bankruptcy will discharge most of your debts. When a debt is discharged in bankruptcy, it is no longer enforceable against the debtor personally. The debtor is no longer required to pay the debt, or the portion of the debt that has been discharged, nor can the debtor be subject to collection activity on the debt, including being sued on the debt. Creditors can, however, move to seize any secured asset on which there is a valid lien that has not been avoided (or cleared) by the bankruptcy court. A bankruptcy discharge serves to erase the debt and give the debtor a fresh start financially. Some debts must still be paid. It is rather a longish list, but the following debts will not be discharged: taxes; spousal and child support; debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; non-dischargeable debts from a prior bankruptcy; student loans; criminal fines and penalties and forfeitures. It does not discharge the debtor from any debt incurred for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.
Any debtor can file for bankruptcy subject to certain restrictions. Individuals, partnerships and corporations can file for Chapter 7. If the debtor’s income is sufficient, after subtracting what you'll spend on certain allowed expenses and monthly payments for child support, tax debts, secured debts such as a mortgage or car loan, and a few other types of debts, to fund a Chapter 13 repayment plan, the debtor will not be allowed to file for Chapter 7. Chapter 13 is restricted to individual debtors with regular income. Chapter 13 eligibility is contingent on the fact that the individual's unsecured and secured debts are between certain dollar amounts that are adjusted annually by statute. Small businesses should file under Chapter 11. The debtor cannot file for bankruptcy if a previous bankruptcy petition was dismissed within the past 180 days.
A meeting of creditors is usually held 20 to 40 days after the petition is filed. The trustee runs the meeting and, after swearing the debtor in, may ask the debtor questions about the bankruptcy and the papers filed. This meeting takes place somewhere in the courthouse rarely lasts more than a few minutes. In the vast majority of Chapter 7 bankruptcies, this is the debtor's only visit to the courthouse. The debtor must attend this meeting, at which creditors may appear and ask questions regarding the debtor's financial affairs and property. If a husband and wife have filed a joint petition, they both must attend the creditors' meeting. The trustee is required to examine the debtor orally at the meeting of creditors to ensure that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy, including the effect on credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt. To preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors.
The primary role of a Chapter 7 trustee in is to liquidate the debtor's non-exempt assets in a manner that maximizes the return to the debtor's unsecured creditors. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the debtor's business for a limited period of time, if such operation will benefit the creditors.
A discharge releases the debtor from personal liability for discharged debts and prevents the creditors owed those debts from taking any action against the debtor or his or her property to collect the debts. As a general rule, individual debtors receive a discharge in more than 99 percent of Chapter 7 cases. In most cases, unless a complaint has been filed objecting to the discharge or the debtor has filed a written waiver, the discharge will be granted to a Chapter 7 debtor relatively early in the case, that is, 60 to 90 days after the date set for the meeting of creditors. Liens are still valid even after a Chapter 7 discharge.
Grounds for denying a discharge to a Chapter 7 debtor include that:
A discharge does not discharge an individual debtor from certain specific types of debts listed in the Bankruptcy Code. The types of debts that are not discharged include:
Upon the filing of the petition, an impartial trustee is appointed to administer the case. The primary role of the Chapter 13 trustee is to serve as a disbursing agent, collecting payments from the debtor according to the repayment plan and, in turn, distributing these payments to creditors.
What are the requirements of the repayment plan in Chapter 13?
The plan must list how the debtor will repay each debt. The plan will generally provide for payments of fixed amounts to the trustee on regular basis – biweekly or monthly. The plan must be approved by the court. The trustee will receive the payments from the debtor and distribute it to the creditors. The creditors generally receive less than the full amount due. There is no fixed format for the repayment plan. Most courts have their own forms. Generally the plans are of three years. However, if the debtor can show cause, plans of five years are also approved. But the court will not approve of plans over five years.
If for some reason the debtor is unable to finish the repayment plan the bankruptcy trustee may modify the plan. The trustee may:
give a grace period, if the problem looks temporary
reduce the total monthly payments, or
extend the repayment period.
It is illegal for employers to fire or discriminate against employees who have been discharged in a bankruptcy proceeding.
Copy of the discharge order can be obtained online using the PACER system or by collecting it from the court office after paying the fees.
Our Columbus GA bankruptcy law firm handles debt relief cases in Columbus, Fort Benning, Chattahoochee County, Harris County, Marion County, Muscogee County, Lagrange, Albany, Newnan, Peachtree City, Carrollton, Troup County.