So you want to go bankrupt

Chapter 7 - is often known as a liquidation and is what most people think of when considering going bankrupt. Sort of like in monopoly when you have no money (or very much money), no assets, (some assets are excluded) and cannot pay your creditors, especially the ones who are dunning you, shutting off your utilities, suing you, foreclosing on you and generally giving you some real stress.. Generally a chapter seven eliminates a debtors obligation to pay his debts that are discharged if the debt existed on the date the bankruptcy was discharged. The purpose of a chapter 7 is to allow a person to obtain a fresh start, free from creditors and free from the pressures of over-whelming debt. Under this chapter, a trustee takes possession of your non-exempt property and assets; converts them to cash and distributes the funds to creditors.

After filing for relief under chapter 7, an individual debtor may or may not receive a discharge. If you are successful the bankruptcy discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example your creditor(s) that have been driving you nuts are not permitted to contact a debtor by mail , phone, or otherwise, to file or continue a law suit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. Any of your creditors who violates this order can be required to pay damages and attorney's fees to the debtor. Creditors usually see the wisdom in honoring court orders.

However a creditor may have the right to enforce a valid lien such as a mortgage or security interest against the debtor's property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged. Also, consider that a business that files a chapter 7 bankruptcy will not receive a discharge and if you receive a discharge under a chapter 7, you may not receive another discharge under this type of bankruptcy for the next 6 years. Not such a long time.

Some debts are generally or always not dischargeable. There are exceptions to every thing I have listed below. How do you think lawyers earn their money? But if you want a general summary of non dischargeable categories it would go something like the following.

Debt from most taxes. Did you think the government was going to let you off the hook. Noooo.

Debts that are in the nature of alimony, maintenance or support. If this were allowed you would see the veritable avalanche of bankruptcy filings.

Debts for most student loans are not dischargeable. Our government forgives debts owed to it by foreign governments but not American kids going to college. If you are having difficulty with students loans you have to explore other options.

Debts from most fines, penalties, forfeitures or criminal restitution obligations are not dischargeable. The courts like their edicts to stick. Speaking of court awards: Any debt for personal injuries or death caused by the debtor's operation of a motor vehicle while intoxicated is an area that is considered not dischargeable. Even if it was your debts that caused you to get drunk in the first place. So watch your drinking if you are going to hit the road. This is good advice in all events.

Some debts which were not properly listed by the debtor may not be discharged . Make sure you have all your debtors listed with names and mailing addresses. Be advised that sometimes the bankruptcy court will decide certain debts are not dischargeable. Also, you as the debtor may decide to give up discharge protections by signing a reaffirmation agreement that is in compliance with the Bankruptcy Code for reaffirmation.

Can you do a chapter seven by yourself. Yes. You can file pro se at the United States Bankruptcy Court at 9^th and Market Street ( suite 400) in Philadelphia. After your initial filing is accepted by the clerk all of your listed debts are stayed ...but not discharged. Pretty nice. Forms and instructions are widely available. The staff of the Clerk's Office (215. 408-2800) will generally try and help you as best they can. They can answer most non-legal questions for you. They are, however, forbidden from giving any advice that may be construed as legal advice. The clerks may not recommend an attorney ( but I can.). Why would you not hire an attorney? Fees are reasonable and regulated by the court and you get the benefit of professional experience in a complex area of the law that has just made some recent changes. Competent counsel will help you deal with the new hoops you have to jump through with the new meaner version of the federal bankruptcy law that your congress and president have enacted. These holders of power and wealth thought the old bankruptcy law was a bit to easy for a lot of filers. Actually there is a lot of grumblings that the credit card-industry wrote the bankruptcy bill whom donated big time to a lot of sitting members of congress. The new law is called "Bankruptcy Abuse Prevention and Consumer Protection Act" which was passed on on April 14, 2005. Philadelphia Congressmen Brady and Fattah voted against it. Philadelphia Congresswoman Schwartz voted for it. Whether you think this is a good law or a bad law watch your debt accumulation, it can sneak up on you and swallow you up. Congress did not reign in the wild interest card rates charged by the credit card companies.

Remember no individual has the identical financial circumstances or even personal reasons for filing for debt relief. Chapter Seven is not the only chapter to consider. There are also for example Chapter 11 - Reorganizations, Chapter 12 - Family Farmer's Debt Adjustment, (not your average Philadelphians remedy), and the Chapter 13 filing- Individual Debt Adjustment which is widely used by Philadelphians who do not qualify or choose not to file for a more complete liquidation.

But when selecting an attorney beware. I know of one attorney who advertises as a bankruptcy specialist and in my opinion this lawyer is simply a hack and not fit to represent individuals seeking bankruptcy representations. Representation by such a pitiful individual can cause you extended unwarranted hardships. On the other hand I personally know highly competent, experienced bankruptcy specialists whom have practiced law for many years in Philadelphia. These lawyers make me proud to be part of the legal profession. If you email me or write me I will recommend a couple of good solid bankruptcy practitioners. No charge for this service and no I do not receive any side compensation from such referrals. Also, as suggested elsewhere on this website it is always good to talk to individuals who have actually been represented competently by legal counsel.

On the borrower industrial complex.

KEVIN PHILLIPS: "....the credit card industry, which is now really a major industry. And in the course of the 1990s and the first couple of years in this decade, they succeeded in getting legislation and decisions from the federal courts, basically, that allowed them to charge any interest rate and charge any fee. And as a result now, somebody whose perceived credit risks seems to change, can all of a sudden wind up paying 28% interest on credit cards. The credit cards charge you fees for everything you can imagine. The low-income people get victimized the most. It’s a giant industry in the United States. After Enron went under, MBNA, which was a big credit card company, took its place as George W. Bush's number one political patron in terms of contributions. So it’s rotten. It’s rotten. This is out of control. We are a money culture now. "

Okay here comes the disclaimer. This page is not to be construed as anywhere near the complete statement on Bankruptcy law or even chapter seven bankruptcy law. You should not rely on any statements herein. Better that you sit down face to face in real time and discuss your issues with counsel licensed in the jurisdiction in which you wish to file. If you cannot understand this disclaimer or do not abide by it you should probably more seriously consider seeking a mental health professional.

Further any advice that I were to advise regarding your finances or your business would be separate from any legal fees that you would incur in a formal decision to file under the United States Bankruptcy code.

Update on the Bankruptcy law voted for by Philadelphia Congresswoman Schwartz .