What Do You Know About Filing For Bankruptcy?

Most people who come to see us about filing for personal bankruptcy have only a vague understanding of what that process entails. Many do not know that the federal courts have exclusive jurisdiction over bankruptcy cases. This means that a bankruptcy case cannot get filed in state court.

A bankruptcy case normally begins with a debtor filing a petition in bankruptcy court. There are several ways a petition can be filed–by an individual, by a husband and wife together, or by a business entity. At the time of filing the petition the debtor is also required to file statements that list assets, income, liabilities, and the names and addresses of all creditors and how much is owed.

It may seem embarrassing to list all the creditors, but it is a crucial part of the bankruptcy process. Those credits will receive notice from the clerk of court that the debtor has filed a bankruptcy petition. Once the petition is filed any debt collection actions against the debtor and the debtor’s property are paused or “stayed” pending resolution of the bankruptcy matter. This means that creditors cannot bring or continue lawsuits, move forward with wage garnishments, or even continue payment demands. It can be a welcome relief for those in the stressful situation of juggling a too-burdensome debt load, but it is far from the end of the road.

The purpose of our bankruptcy system is to allow a debtor a chance to reorganize his or her life and establish a plan to repay creditors. Sometimes, though a liquidation is involved because there is little or no money available to pay creditors. In those cases a debtor is normally granted a “discharge” of those debts, though the problem of securing future credit remains.

If you or a loved one is considering bankruptcy, contact the attorneys at Lord & Faris. Our experienced staff can help you decide if this path is right for you.

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