What is Bankruptcy and How Can it Help Me?
Briefly, bankruptcy is a set of federal laws that allows people ("debtors") to have some or all of their debts eliminated because they cannot afford to pay those debts as they become due. Bankruptcy law encompasses both Chapter 7 (sometimes referred to as "straight" bankruptcy) and Chapter 13, which will involves a full or partial repayment plan for debts under court supervision. Bankruptcy is particularly effective in eliminating or restructuring unsecured debts, typically credit cards, medical bills, personal loans, and claims for repossessed vehicles. Bankruptcy can also eliminate certain older income taxes.
Bankruptcy will usually not eliminate student loans, recent income tax bills, child support and alimony obligations. Also, most debts that arise from fraud, criminal acts and drunk driving accidents will not be discharged.
Secured debts, which for most people mean house and vehicle payments, must be paid on time if you do not wish to have them foreclosed or repossessed.
Upon filing a bankruptcy case, you are protected from virtually all collection actions your creditors may wish to throw at you. They can no longer call you at home or work. They cannot start or continue a legal action against you without court permission. They are also prohibited from repossessing vehicles and garnishing wages. Your creditors will have to communicate with your attorney, not with you. Once you have filed your case, all you tell them is to "Call my Lawyer."