Bankruptcy is a Congressionally mandated set of laws that allow people, both individuals and married couples, to set aside their debts and get a fresh start, free of the sometimes overwhelming obligations that cannot be removed in any other way.

Loss of a job or loss of hours, medical emergencies, the onset of illness or other unplanned for problems or emergencies can present financial burdens that seem to be insurmountable. Long before the United States recognized bankruptcy in the early 1800s, many societies also recognized the need to allow people a financial “do over” or fresh start. It has long been realized that it is a greater benefit to society to allow an orderly way for people to rid themselves of debt that they can never hope to repay.

People today, both individuals and married couples, may file for bankruptcy relief under various provisions of the bankruptcy code. Chapter 7 or Chapter 13 bankruptcy are the most used provisions of the code.

Chapter 7:  Sometimes called the “fresh start” or “straight discharge” or “liquidation” bankruptcy. Any assets not exempt (for example higher valued cars that are owned outright, in Nebraska, homes with equity greater than $60,000.00) are liquidated or sold by the bankruptcy trustee and the money collected is divided among the creditors. In most cases, people keep all of their possessions when filing under Chapter 7.

Chapter 13:  When a person or a couple make more money than average, they may be required to repay some or all of their debts over time, usually 3 to 5 years. This type of bankruptcy, also called a Wage Earner Bankruptcy, is used when a person is behind on their house payment; the past due payments (called “arrearage”) is paid over time. This protects the home from foreclosure. After the 3 or 5 years are completed and all payments made to the trustee, the person or couple are discharged from the bankruptcy and the mortgage is up to date. You keep all of your possessions when filing chapter 13. However, ff you wish to surrender something, say a car that is worth far less than what you owe, you may do so and discharge or rid yourself of the debt as well.

In both chapter 7 and 13, creditors are not allowed to contact the debtor(s) regarding their debt by any means (including phone or mail) and if they do so, the debtor may be entitled to compensation from the creditor. Likewise, after the bankruptcy is successfully completed, many debts are fully discharged and it is against the law for the creditor or debt collector to take any action to collect that debt. If they do, they may be sued and required to pay compensation to the debtor.

Filing bankruptcy stops wage garnishments, bank garnishments, repossessions, foreclosure, phone calls at home or at work. It gives you much more control and protection and the chance to get a fresh start in life.

If you have questions about your debt obligations and whether bankruptcy is the right solution for you, why not call an experienced Bankruptcy Attorney today.