Bankruptcy Law FAQs

A Chapter 7 bankruptcy will not cover any debts not listed at the time of filing. It also does not eliminate the following:

  • Recent taxes
  • Child or spousal support
  • Court fees, fines, penalties, or restitution
  • Debts arising from an OWI conviction
  • Debts caused by the debtor's fraud

Creditors can object to keep debts in force if they prove the debts meet certain categories.

Chapter 13 bankruptcies only eliminate debts listed in the original plan; additional debts will not be eliminated. Chapter 13 bankruptcies also not affect the following:

  • Student loans
  • Debts arising from an OWI conviction
  • Court fees, fines, penalties, or restitution
  • Child or spousal support

Long-term debts covering a period beyond the end of the term are not affected. These can include mortgages, debts incurred by fraud, and tax-related debt such as delinquent taxes or penalties for tax evasion.

The court can rule that settling the loan would impose severe hardships on the debtor. To meet this requirement, the debtor must show the court that a good-faith effort was made to repay the student loan, and that the debtor will be unable to maintain a minimum standard of living while repaying the loan. This is a specialized action and costly. You must show that you have no real chance at ever earning income and paying back the student loan.

It is possible in some situations to reduce past debts. However, bankruptcy does not affect future obligations, and these will remain even after the bankruptcy process is complete.

If you file for Chapter 7 bankruptcy and you are behind on your mortgage, you could lose your home. This depends on your equity in the property and your state's homestead exemption. If there is an automatic stay, you can request that the bankruptcy court lift it to begin foreclosure. In a Chapter 13 bankruptcy, you can keep your home as long as current and missed mortgage payments are part of the plan.

There are several categories of income and property exempt from bankruptcy. These include:

  • Vehicles, to a value limit
  • Reasonably necessary property, such as furniture, clothing, and appliances
  • Tools necessary to the debtor's profession, to a value limit
  • Jewelry, to a value limit
  • Benefit payments, such as welfare, Social Security, and unemployment payments
  • Damages awarded by a court

Property that is usually relinquished during a bankruptcy can include those in excess of the exemptions.

You should determine whether your financial difficulties are temporary. You can ask your creditors to adjust your payments or payment schedule. Creditors may agree to this if you have been prompt in the past, or simply to avoid a costly and inconvenient bankruptcy proceeding. If you seek the help of a credit counselor, do research on the organization first. Some advisor's work for non-profit agencies, but others charge fees and can offer unscrupulous or simply wrong advice.

An attorney with experience in bankruptcy law can help you whether you are a debtor or a creditor. Keep in mind that the new bankruptcy law of 2005 is very complicated. If you are a debtor, an attorney can help to speed the process and protect your interests. If you are a creditor, an attorney can help you recover your debts.

The simple solution is to get payment at the time you perform the service. If you round bale, collect the payment per bale before the bales leave the field. Not only will you not have a dispute on how  many bales are made, but you will not serve as the short term lender to the person who hired  you.

You can file a custom farm lien against a farm for work performed, but in the event of a bankruptcy, from a practical stand point, you may move yourself to the front of line to receive little income.

Stop contacting them at once. Don't send anymore statements and don't call them about their debts. The bankruptcy court issues an "automatic stay", which halts any attempts to collect a debt, once the debtor files.  

If you have  secured debt, you can contact the debtor to see if they want to "reaffirm" their debt. This means that the debtor indicates that despite the bankruptcy filing, it wants to keep the property. In exchange, the debtor has to continue to pay the debt. If the debtor doesn't want to pay the debt, the debtor can abandon the property. If the property is abandoned, the secured creditor can go retrieve the property but cannot seek any additional funds from the debtor.

If someone files a bankruptcy against a debt they owe you, and then returns to your place of business and attempts to pay you for it anyway things change. This is called a reaffirmation of the debt and once they pay on it or state they will pay on it despite the bankruptcy, the debt is no longer non payable and you may take funds from the debtor.

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