Exactly what is bankruptcy?

Bankruptcy is a legal proceeding provided by federal law that allows those who are unable to pay their bills to obtain a fresh start. Included in the U.S. Bankruptcy Code are two options for individuals in financial trouble. Chapter 7, also called straight bankruptcy, and Chapter 13, the Wage Earner Plan, are ways you can regain financial stability.


When is my bankruptcy filing effective?

The moment the court receives the completed petition. When your petition is filed, all suits, wage attachments and other collection activities against you must be stopped. Once you have filed bankruptcy, your attorney will discuss which bills you must pay and the ones you are legally entitled to stop paying.


What will happen to my credit rating?

Creditors will often say this to discourage you from filing bankruptcy. There is no federal or state law that prevents you from buying on credit after bankruptcy. Keep in mind that if you are 60 to 90 days behind on your bills, have been sued or had your wages attached, had a repossession, a home foreclosed on or have debts in a collection agency, you probably cannot buy on credit now. According to the Fair Credit Reporting Act, Chapter 7 and Chapter 13 will go on your credit record, and may remain there for 10 years. However, the large local credit reporting firms remove Chapter 7 after nine years and nine months, and Chapter 13 after six years and nine months.


Will the court take any of my property?

In most cases, you are able to keep your home and car, and much of your personal property, including savings, furniture and household goods.


Can I buy a home, change jobs, start a business, buy furniture or a car, or move to another city or state after I file bankruptcy?

Yes. Bankruptcy does not bar you from your normal daily activities, your civil liberties or rights.