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Personal Bankruptcy

Personal Bankruptcy is a legal proceeding in which a person who cannot pay their bills is granted a fresh financial start. The right to file for personal  bankruptcy is provided by federal law, and all personal bankruptcy cases are handled in federal court. Filing personal bankruptcy immediately stops all creditors from seeking to collect debts from you, up to, or at least until your debts are sorted out and according to the law.

To begin the personal bankruptcy process your attorney will have you itemize all of your current income sources such as; major financial transactions for the past two years; state your monthly or yearly income, your monthly living expenses; all debts including secured and unsecured; and all property assets such as furniture, electronics, clothing, jewelry, and possessions – including any or all real estate. You should also collect your tax returns for the last two years, deeds to any real estate you own, your car(s) titles, and may need to provide three written car appraisal estimates to the courts and documents for any outstanding loans you may have.

Once you have gathered this information, and with the help of your attorney, it will then be determined which property is exempt from seizure based on state and federal laws. For you to file, your attorney will need to file a petition and several other forms at your states bankruptcy court. Personal Bankruptcy Forms collectively are referred to as the schedules which asks you to describe your current financial status and recent financial transactions – typically -- within the last two years. If your creditors, trustee or the judge feel or discover that you have not been truthful in your bankruptcy filing, it could very well jeopardize the outcome of your petition.

What Personal Bankruptcy Cannot Do

Filing for Personal Bankruptcy cannot cure all of your financial problems. Nor is it the right step to take for every individual. In personal bankruptcy, it is usually not possible to:

• Eliminate certain rights of secured creditors. Common examples of secured loans are: car, boats, motorcycles, and home mortgages. Payments over a specified and reasonable time frame to your secured creditors can be arranged. However, if your property is taken your obligation to pay any additional amount owed will be eliminated as well. So it is important to keep in mind, you cannot keep the collateral unless you agree to continue to make payments on your debt.

• Personal bankruptcy cannot discharge child support, alimony, student loans, court restitution orders, criminal fines, and some taxes.

• Personal Bankruptcy cannot protect cosigners on your debts. For example, if a relative or friend has cosigned a loan, the cosigner may still be obligated to repay all or part of the loan.

• Personal Bankruptcy cannot discharge debts that arise after your personal bankruptcy forms have been filed.

The Three Common Types Of Bankruptcy

Chapter 7 Bankruptcy is known as "straight" bankruptcy or "liquidation." In a bankruptcy case under Chapter 7, you file a petition asking the court to discharge your debts.

Chapter 13 Bankruptcy is called "personal reorganization bankruptcy.”

Businesses and a few individual debtors whose debts are very large use Chapter 11 Bankruptcy, known as “reorganization.”

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