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Personal bankruptcy is a way of getting protection from your creditors. Bankruptcy has been around since biblical times (take a look at Deuteronomy 15), and has been used as a means for people to obtain relief
from burdensome debts.
The U.S. bankruptcy laws are formulated to give the "honest" debtor a "fresh" start. Bankruptcy is intended
to level the playing field between people who owe money and the people they to whom they owe money.
In medieval Italy, when a businessman did not pay his debts, it was the practice to destroy his trading
bench. From the Italian for broken bench, "banca rotta," comes the term bankruptcy. In England, the first
bankruptcy laws considered a bankrupt person to be a criminal and subject to punishment ranging from
prison to the death penalty. Modern bankruptcy laws, however, emphasize rehabilitating (reorganizing)
debtors in distress.
Bankruptcy is a necessary safety valve in our economy. Without bankruptcy, people that are over their
head financially would give up or become part of the underground. Society benefits when people file for
bankruptcy because it enables them to return to productivity. |
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Chapter 7 Bankruptcy is called a "liquidation" bankruptcy. Chapter 7 bankruptcy is designed to help people who are unable to pay their existing debts. The purpose of filing a Chapter 7 case is to obtain a discharge
of your existing debts. When you file for Chapter 7 bankruptcy you can wipe out debt from:
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- Credit cards
- Personal loans
- Certain tax debts
- Parking tickets
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- Store cards
- Checking account overdrafts
- Medical and dental bills
- Social Security and unemployment overpayments
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In Oregon, a Chapter 7 a trustee takes possession of your property that is not considered "exempt." Common property types that you can keep in Oregon when you file for Chapter 7 bankruptcy are:
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- Bank accounts with a total value of up to $400
- Clothing and jewelry with a value of up to $3,600
- Homes with a total equity of up to $33,000
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- Automobiles with total equity of up to $3,400
- Household furniture with a value of up to $3, 000
- Retirement accounts from a current or previous employer
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In Washington, a Chapter 7 in Washington a trustee takes possession of your property that is not considered "exempt." Common property types that you can keep in Washington when you file for Chapter 7 bankruptcy are:
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- Personal Property of any kind with a value of up to $2000 or, if Debtor does not own a home, up to a value of $9,000.
- Household furniture with a value of up to $2,700
- Retirement accounts from a current or previous employer
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- Automobiles with total equity of up to $2,500 or $5,000 for married couples
- Jewelry with a value of up to $1,000
- Homes with a total equity of up to $40,000
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Unfortunately, not every debt can be wiped out. Debts that are not wiped out include:
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- Most taxes
- Debts obtained through fraud or deception
- Most student loans
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- Child support and alimony
- Court-ordered fines and criminal restitution
- Debts for personal injuries caused by driving while intoxicated or taking
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Chapter 13 bankruptcy, known as the "Wage Earner Bankruptcy," is designed for those individuals
who are able to repay a portion of their debts over time. Most individuals who seek protection under
Chapter 13 of the U.S. Bankruptcy Code are those who:
- own property that would not be considered exempt under Chapter 7;
- have a past due balance on a mortgage or car loan and wish to repay those past due balances over time without fear of foreclosure or repossession;
- have debts such as student loans that would not be discharged under a Chapter 7 bankruptcy; or
- have Disposable Income (as it’s defined by the bankruptcy laws) sufficient to repay a portion of their debts over a three year period of time (this period is five years for people who do not qualify for Chapter 7).
Under Chapter 13 you are given the opportunity to catch up on past due mortgages, car loans
and rent payments. In addition, if you repay your debts through Chapter 13 you are given a
predictable payment plan that your creditors are required to accept. The major difference between Chapter 13 and debt consolidation is that Chapter 13 gives you the protection of the
U.S. Bankruptcy Code to protect yourself from continued interest, late fees, and credit harassment.
Our experienced bankruptcy lawyers can explain and help you put together a proper Chapter 13
Plan to ensure that it is a successful one.
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Your ability to file for Chapter 7 bankruptcy and wipe out your debts is determined by your household’s Current Monthly Income, which is the sum of the following:
- your average gross (before taxes are taken out) income over the past six months
- PLUS your spouse’s gross income (unless you’re separated)
- PLUS any contributions to your household expenses by other persons
Current Monthly Income does not include any of the following income:
- Social Security benefits;
- Unemployment; and
- Crime and Terrorism Victims Compensation.
Any portion of your spouse’s gross income that is not contributed to household expenses is not counted towards the amount of money you have available to repay your debts. Therefore, your spouse’s income is counted for information purposes only and will not impact your ability to file for Chapter 7 bankruptcy.
If your Current Monthly Income is less than the state median family income for a household of your size then you automatically qualify for Chapter 7 bankruptcy. If your monthly household Bankruptcy Income is greater than the state median family income for a household of your size then you may or may not be eligible for Chapter 7.
| MEDIAN FAMILY INCOME BY FAMILY SIZE |
| (in 2005 inflation-adjusted dollars) |
| Family Size |
Washington |
Oregon |
| 1-person families |
$43,891 |
$37,530 |
| 2-person families |
$54,044 |
$48,676 |
| 3-person families |
$59,732 |
$54,633 |
| 4-person families |
$73,259 |
$61,209 |
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If your Current Monthly Income is greater than the state median family income for a household of your size the courts look to your allowable expenses (these may or may not be the actual amounts you spend on your basic living expenses). If your Current Monthly Income minus your allowable expenses leaves with enough money to repay a certain portion of your debts over time then you may be eligible to file for Chapter 13 bankruptcy. |
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Your bankruptcy case progresses in steps, beginning with the first day you step into our office. We'll
immediately work to stop harassment by the debt collectors; if necessary, we will bring a lawsuit on your
behalf against them to enforce your legal rights under the Fair Debt Collection Practices Act. We'll draft
all of your bankruptcy papers and make sure that all necessary documentation is made available. You'll
always be involved in the process so that you know exactly the status of your case.
Pre-Filing Certification
In order to be eligible to file a Chapter 7 or Chapter 13 bankruptcy, you must complete a pre-filing
briefing outlining the opportunities for credit counseling AND assists the individual in performing a
budget analysis within 180 days before your case is filed. When your case is filed you must file with
the bankruptcy court the certificate you receive from the approved nonprofit budget and credit
counseling agency. We will provide you with a list of approved credit counseling agencies.
Filing Your Case
As soon as your case is filed with the court, a Trustee is appointed. The trustee's role is to sell any
assets that are not protected by law and to distribute the proceeds of that sale to your creditors. In
most cases there are no assets to liquidate, so do not be concerned. If the trustee does identify
assets, we probably have already advised you about this possibility.
If you have filed a Chapter 13 case, the trustee is responsible for reviewing your proposed repayment
plan, making recommendations to the court regarding the feasibility of that plan, and distributing the
payments to your creditors under the terms of the plan. You will be sending your Chapter 13 payments
to the trustee each month, along with any other documents required by law.
All About The Meeting Of Creditors
This meeting, which is held in all bankruptcy cases, usually occurs within 4-6 weeks of the filing of your
case with the court. The purpose of the meeting is to give creditors a chance to ask questions, although
it is very rare that a creditor shows up; it is mostly handled by the trustee assigned to your case. The
trustee may also ask you questions about particular items on your petition usually focusing on assets
or income. Most meetings take only a few minutes.
Some consumers feel some level of anxiety or fear leading up to the meeting with the bankruptcy
trustee, but there is no reason to fear the trustee. The meeting will take place in an ordinary
conference room, and the trustee is not a judge; the setting is informal. After the meeting most people
comment on how simple the process was.
How To Be Prepared For Your Meeting Of Creditors
You must bring state-issued photo identification and your social security card to your meeting. There are
other documents that need to be provided to the trustee before your meeting can take place, and we
will send you a letter with the list.
Attending Your Hearing on Confirmation For Chapter 13 Cases
If you file a Chapter 13 case there is one additional hearing you must attend. This is called a Hearing
on Confirmation, and it takes place after your Meeting of Creditors. At the Hearing on Confirmation
the trustee will make a recommendation to the judge as to whether your proposed payment plan is
sufficient to satisfy the requirements under the Bankruptcy Code. The judge will then give final
approval to your repayment plan or tell us to make adjustments.
How Long Your Case Takes To Complete
All Chapter 7 and Chapter 13 debtors must complete a Financial Management Course before they
receive a Discharge. This Course is intended to help Debtors identify and correct the financial
mistakes that led to bankruptcy.
In a Chapter 7 case, your case is usually completed approximately 90 days after your Meeting of
Creditors; at that time you will receive a single-page document titled Discharge of Debtor from
the court. The discharge order is the official court order relieving you of your obligation to pay your
bills. Remember that the Discharge of Debtor in a Chapter 7 case will not relieve you of all of your
debts. You should speak with us to find out which debts will not be discharged in a Chapter 7 case.
In a Chapter 13 bankruptcy case, the discharge order is issued upon your successful completion of
the repayment plan. This will vary depending upon the length and type of your Chapter 13 Plan. |
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The fact that you filed for bankruptcy can remain on your credit record for a period of ten years.
This does not mean that you will not be able to get anything, finance anything,
or make anything during that time. Filing for bankruptcy will not spell the end of your credit.
Think of it this way: if you're unable to pay your debts right now, your credit is probably not very good.
Maybe you've been paying your debts late, or perhaps you haven't been able to pay them at all. When
you've got past due debts that are clearly beyond your control it's unlikely that anyone will give you credit
at a reasonable interest rate.
By filing for bankruptcy you can eliminate those debts and begin to save money again. And once you save
money you won't need credit for routine expenses such as groceries, gasoline and clothing. |
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