Bankruptcy Information & Filing For Bankruptcy
Our federal system of bankruptcy law has its origins in the U.S. Constitution, which provides that Congress shall have the power to establish "uniform Laws on the subject of Bankruptcies throughout the United States." Today that system of debt relief is embodied in Title 11 of the United States Code, known as the Bankruptcy Code.
A principal purpose of the Bankruptcy Code is to provide a fresh start to the honest but unfortunate debtor. The Code gives you a fresh start by canceling many or all of your debts through a Court order known as the discharge.
The Bankruptcy Code is divided into "chapters" which provide different ways of obtaining a bankruptcy discharge and spell out the requirements of debtors, trustees who oversee their bankruptcy estates, creditors, and the Court.
The chapters of the Bankruptcy Code most commonly used by individuals and married couples to obtain a discharge of debts are Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy – This is the most common type of bankruptcy used by individuals, but it may also be used by businesses. It is known as the "liquidation" chapter of the Bankruptcy Code because, in theory, a court-appointed trustee collects assets and sells them and uses the proceeds to pay creditors some or all of their claims. In the vast majority of Chapter 7 cases in the District of Hawaii, however, no assets are liquidated because generous exemptions available under state or federal law protect the assets of most filers from liquidation. In those cases, the person filing Chapter 7 bankruptcy can receive a bankruptcy discharge without making any payments to creditors or losing any assets.
A "means test" determines eligibility for Chapter 7 bankruptcy and disqualifies people with high earning capacity and high disposable income from obtaining relief under this chapter. For higher-income individuals who do not qualify for Chapter 7 bankruptcy or individuals who have high-value assets that cannot be exempted, Chapter 13 bankruptcy is the most common alternative to Chapter 7.
Chapter 13 Bankruptcy – This is designed for an individual debtor with a fixed income, but it can also be used by small businesses. Called "individual reorganization," those filing for bankruptcy under Chapter 13 enter into a repayment plan during which they pay what they can afford to pay toward their debt over a three- to five-year period. Unlike in Chapter 7 bankruptcy, no property is liquidated in a Chapter 13 bankruptcy. Individuals with high-value assets are able to keep those assets in Chapter 13 bankruptcy. But for that privilege, they can be required to pay the non-exempt value of their assets into their repayment plans.
Chapter 13 bankruptcy is commonly used to allow individuals to avoid foreclosure by catching up on missed mortgage payments over a longer period of time than the mortgage company would be willing to allow. Vehicle loans also can sometimes be restructured in Chapter 13 to reduce monthly payments and prevent repossession if the loan is in arrears.
Getting It Done – The first step when someone is filing bankruptcy is to collect all personal financial information, including all debt papers, previous tax documents, pay advices, and loan data. Your bankruptcy attorney will then need to complete the bankruptcy forms (or schedules). An automatic stay begins immediately upon filing for bankruptcy, preventing creditors from sending payment demands, calling you on the phone, suing you, garnishing your wages or bank accounts, or taking any other action to collect on a debt or recover property from you without Bankruptcy Court permission.
A trusted and experienced bankruptcy attorney at The Law Office of Jean Christensen LLLC can advise you as to whether bankruptcy is an appropriate course of action and which chapter of bankruptcy is most advantageous to you. There is no cost for an in-depth consultation with Honolulu bankruptcy attorney Jean Christensen. Call 808-521-1202 today to schedule a free, no-obligation consultation. We offer affordable rates and flexible payment plans to start you on the road to financial recovery today.