What is bankruptcy? Bankruptcy is a legal process by which a debtor (someone owing money) can file for court protection from creditors seeking repayment of loans. Bankruptcy laws in the United States trace their origins back to bankruptcy laws in England, as far back as 1542, under Henry VIII. The earliest U.S. Congress enacted bankruptcy laws to protect Americans in the new republic from creditors seeking to reclaim property, often under very harsh terms of loan agreements. As a nation, we have always placed a priority on helping people get a fresh start and a second chance.
As bankruptcy laws evolved and changed over the past 200 years, creditors such as banks and private lenders (including credit card companies) have sought to place a stigma on people who have needed to take advantage of court protection. Naturally, creditors don't want to willingly give up their right to collect on the money they have loaned, but collectors often went too far, leading to the Fair Debt Collections Practices Act (FDCPA) of 1977, in an effort to regulate a collections industry that was beginning to use harsh harassing tactics to scare debtors into paying their bills.
It is important to remember that bankruptcy is a legal process, involving the U.S. federal court system and an appointed judge and trustees. That means that both sides are guaranteed equal protection under the law. When you are filing for bankruptcy, you are petitioning the court to eliminate or consolidate your debts, to protect you from further legal action by your creditors. The court must review your petition and decide whether your case has merit to proceed, just like any lawsuit. Your petition is not an automatic approval to walk away from your debts. Your creditors will work equally hard to protect themselves from losing the money they loaned you. Yes, they will have their day in court, too (known as the Creditors' Hearing for Chapter 7 debt elimination bankruptcy and the Plan and Confirmation Hearing for Chapter 13 debt consolidation).
The Golden Law Group will answer all of your questions to help you determine whether bankruptcy is the best debt relief solution for you and your family. Chapter 7 bankruptcy is the preferred petition for people wishing to discharge their unsecured consumer debts, such as credit card debt. But not everyone qualifies. In response to an increase of Chapter 7 filings over the past decade, laws were passed to ensure that only individuals who meet a strict eligibility requirement will qualify. Petitioners must complete a means test, to determine a required ratio of debt to income before Chapter 7 is allowed. This is not correct. The means test does not have anything to do with a debt to income ratio but is instead focused on disposable income. If the debtor has disposable income under the means test a presumption of abuse arises and the debtor will unlikely be able to file a Chapter 7.
Many people file Chapter 13, which allows the petitioner to consolidate all debt, including student loans and government debt into a restructured monthly payment plan, supervised by the court. Chapter 13 is often the preferred option for people who can meet their debt obligations, but are hampered by excessive interest rates, late fees and penalties. Chapter 13 debt consolidation is typically a three or five-year plan that can save the petitioner thousands of dollars in total repayment. It is also possible to discharge debt under Chapter 13.
Contact an attorney at The Golden Law Group for a free consultation to discuss your current financial circumstances. Attorney Don Golden is a certified bankruptcy specialist, as certified by the American Board of Certification. The firm's attorneys are experienced, knowledgeable and compassionate about your situation. From offices in Brandon and Bradenton, the firm represents clients in bankruptcy courts throughout the Florida Central Gulf Coast region.