What Is Bankruptcy?
Bankruptcy law is federal law. As such, it expresses a national policy that persons who are struggling financially should get relief and a chance at a “fresh start.”
The law recognizes the fact that things happen –– the economy falters, divorce, illness, unfortunate financial decisions, and so on. The bankruptcy court will not ask you, and you are not required to give a justification to get a discharge, the legal term for a cancellation of your financial obligations.
For individuals, there are basically two types of bankruptcy: Chapter 7 and Chapter 13. In both, the debtor gets a discharge of his debts. The major difference between the two is that in Chapter 13, the debtor makes a payment to the court for a period of three to five years, based on his ability to pay and also on what the debtor proposes to do in his plan to restructure his finances.
Preparation of a bankruptcy filing involves complete and honest disclosures of household income and expenses; disclosures of the debtor’s major financial transactions during the past two years; a listing of all the debtor’s creditors, including addresses, account numbers and amounts owed; and a listing of the debtor’s assets including bank accounts, cars, homes, etc. and the values of each. (See the client questionnaire with checklist of what to bring to the interview.)
Note, however, since the law wants to help you and not leave you destitute it provides a minimum schedule of property that’s protected, depending on whether you reside in Maryland, Virginia or the District of Columbia, and that you will need to launch your new financial life.
Once the case is filed a private attorney, known as a trustee, is assigned to the case by the court. His job will be to analyze the disclosures and see if there is any non-exempt property that can be sold and the resulting funds used to pay the creditors at least partially. You will be get notice of a date for a meeting with this trustee set about thirty days after filing. Your attorney will accompany you.
After the meeting, you will enter a waiting period of approximately three months during which time creditors are given an opportunity to investigate the case and oppose the discharge, if they have grounds, which is rare. Upon the expiration of that period, the court will issue a discharge order to your creditors.
There are state and local variations in the bankruptcy law, procedure, and exemptions in which our office files case (DC, northern Virginia, and suburban Maryland). Consult an experienced attorney to discuss and help plan your case.