David William Jordan

Attorney & Counselor at Law

Bankruptcy Law


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Do you want the harassing phone calls to stop?

Is your paycheck too little to cover both debts and food,
clothing, and shelter for your family?

Do you need a way to catch up on missed mortgage payments?

Are you at risk of losing your car?

CONSIDER BANKRUPTCY!

PURPOSE - The bankruptcy process was created, and is maintained, by the federal government to provide a fresh start for debtors who have gotten in over their heads, and to provide for fairness among creditors. Bankruptcy achieves that purpose by providing a shield against the attacks of creditors.

TYPES OF BANKRUPTCY - for a consumer, there are three types of bankruptcy available. The types are known by the number of the chapter of the Bankruptcy Code where that type of bankruptcy is described.

Chapter 7 bankruptcy is known as a liquidation. In Chapter 7 the bankruptcy trustee sells all of the property of the debtor which is not exempt, and divides the cash produced by that sale among the creditors. In a consumer bankruptcy, it is usual for all of the debtor's property to be exempt.

Chapter 11 bankruptcy is known as a reorganization. In Chapter 11 the debtor writes up a plan reorganizing the debt of the debtor into amounts and terms that are manageable by the debtor. After the plan is approved, the reorganized debt becomes the debt of the debtor going forward. Usually, a reorganization is undertaken only by businesses, but it is available as well to individuals.

Chapter 13 bankruptcy is known as an adjustment of debt. In Chapter 13 the debtor also writes up a plan describing the debtor's monthly income and expenses over the next 3 to 5 years. The excess is given to the creditors. A common reason to undertake bankruptcy under Chapter 13 is to save one's house or car when the debtor has missed so many payments that the debtor cannot catch up quickly. The debtor can catch up over the 3 to 5 years of a Chapter 13 plan. There is also a bankruptcy under Chapter 12, but in Chapter 12 the debtor must be either a family farmer or a family fisherman.

DISCHARGE - In all three types of bankruptcy, most of the debts which the debtor had at the beginning of the bankruptcy are wiped out at the end of the bankruptcy (called a discharge). But, not all debts can be discharged in bankruptcy. Some of the debts which cannot be discharged in bankruptcy are taxes, student loans, obligations arising in a divorce decree, personal injury resulting from drunk driving, restitution for a crime, child support and alimony, recent cash advances on a credit card (including balance transfers between credit cards) and debts resulting from the fraud of the debtor.

EXEMPT PROPERTY - Property not sold by the trustee in a Chapter 7 case is called exempt. Exemptions include:

  • $100,000 of equity in a home
  • $4,000 of equity in a motor vehicle
  • $3,500 of equity in household goods
  • clothing, beds and bedding
  • $5,000 of equity in tools of a trade
  • all tax deferred retirement accounts
  • $500 of jewelry, $400 of fuel and food and $800 of collections
  • $1,000 of anything extent the debtor has not used up other exemptions

The debtor keeps property that is exempt.

HOW LONG - Bankruptcy cases vary in length. Usually, a bankruptcy case under Chapter 7 will take 5 to 6 months, start to finish. A case under Chapter 13 will take 3 to 5 years. A case under Chapter 11 will take 2 to 3 years. It is at the end of the bankruptcy case that the debtor's debts are wiped out (called a discharge).

WHERE TO FILE - A bankruptcy case must be filed in the state where the debtor lived for the greater part of the six months immediately before the start of the bankruptcy case. In New Hampshire, the bankruptcy court is located at 1000 Elm Street in Manchester.

CONSEQUENCES - While it can be a great help in unhappy circumstances, filing bankruptcy is not without unpleasant consequences. The bankruptcy will be on the debtor's credit record for 11 years after the debtor receives the discharge (see HOW LONG, above). After filing bankruptcy, the debtor will be unable to get a loan for a house or a new car, student loans will be more difficult to obtain, and the number of places where the debtor may rent housing will be reduced substantially for a significant number of years. Over the years after bankruptcy, if the debtor pays the debtor's bills on time, the ability to borrow money will improve gradually but slowly, and eventually the bankruptcy will be a factor no longer.

Would you like to know more? Read our next article A General Overview of the Process of Filing for Bankruptcy.

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