The bankruptcy process isn’t something most people tend to think much about unless they are nearing the point of needing help. Getting to know some of the basics can help you make an educated decision about your path to debt relief. Here are some of the more common concepts you need to understand when considering bankruptcy in Bryan:
What is the petition?
The petition is the document that activates your case filing. It is a lengthy document that asks detailed questions about your debts, income and wages, fund accounts, and assets. This document is used to give the court an idea of your financial situation for purposes of determining your bankruptcy plan.
What Chapter do I file under?
There are two main types of personal bankruptcy, Chapter 7 and Chapter 13. A Chapter 7 bankruptcy is known as a liquidation bankruptcy, in which some of your nonexempt assets could be liquidated to satisfy creditors. A Chapter 13 bankruptcy is a reorganization bankruptcy that rolls your debts into a single payment, to be paid over a period of three to five years.
How do I know if I am eligible?
To be eligible for Chapter 7 you must pass a means test. This test compares your income to the median income level of the state, where incomes less than this threshold may qualify for Chapter 7. There are no eligibility requirements for filing Chapter 13 other than to have not filed a prior case within 2 to four years prior, unsecured debts less than $383,175 and secured debts less than $1,149,525.
What happens to my creditors?
When you file for bankruptcy the court issues an automatic stay order. This order is served to your creditors informing them of your case filing. Creditors are prohibited from making collection attempts while under the automatic stay. If a creditor wants to stake their case, they must file a proof of claim. Debts that are discharged by the court are considered resolved, which could mean creditors don’t get paid.
Who is the trustee?
The trustee is the court appointed monitor of your case. They act as a mediator and deal with creditors for you. They are responsible for determining if any of your nonexempt assets are to be liquidated, as well as pay creditors as outlined in your plan.
What is a discharge?
A discharge is a court order of a successful debt resolution. Debts that are discharged by the court are granted permanent protection from collection under the automatic stay. The exception being any jointly held or co-signed debts, those could still be collectible by the other, non-filing party.