When contemplating bankruptcy, it’s important to retain a bankruptcy attorney who knows your city as well as they know the law. Based in Richmond, Virginia, Kane & Papa, P.C. provides legal counsel to individuals and businesses during the bankruptcy process, helping clients to obtain a fresh start and begin repairing their credit. In order to lend some clarity to certain issues, we provide these answers to commonly asked questions. Please keep in mind, however, that no single answer fits everyone’s unique situation. If you or your business faces mounting debt or harassment from creditors, and you wish to discuss your options under bankruptcy law, please contact Kane & Papa, P.C. for a free initial consultation.
Generally, once you file for bankruptcy under Chapter 7 or Chapter 13, creditors may not call you regarding collections, and may no longer initiate new legal proceedings or continue with proceedings they have already started, including wage garnishments. This injunction is referred to as an “automatic stay.” In fact, once you are under the protection of the bankruptcy court, you will most likely only have to deal with the court and the designated bankruptcy trustee, rather than the creditors themselves.
If a creditor continues to pursue collection efforts after being informed of the bankruptcy proceedings, the creditor may be liable for court sanctions as well as damages under the Fair Debt Collection Practices Act.
Your credit has probably been affected by your present financial situation; likewise, your credit will be affected if you decide to file for bankruptcy. However, bankruptcy can be an effective way to regain control of your finances and provide a fresh start for handling debt. Although initially your credit score may decrease, many debtors find that their credit scores begin to improve not long after they file for bankruptcy. It is important to note that most types of bankruptcy will stay on your credit report for a period of up to seven to ten years. An experienced bankruptcy attorney, such as the attorneys at Kane & Papa, P.C., can advise you of the impact bankruptcy will have on your credit.
Exempt property generally includes your home, the items inside your home, your car, and your retirement accounts. In certain circumstances, you may also be able to keep some monetary assets. Determining which property is exempt can be a complicated matter that is heavily dependent on the specific circumstances of your situation; an experienced attorney can examine your assets and advise you as to what property you will likely be able to keep.
Under the Federal Bankruptcy Code, Congress has determined that certain types of debt are not dischargeable in bankruptcy for public policy reasons. The debtor must still repay these debts after bankruptcy. For example, the following debts are not dischargeable in bankruptcy:
Chapter 7 bankruptcy is also known as liquidation bankruptcy because it discharges or eliminates most unsecured debts. In exchange for the discharge, you must surrender any of your non-exempt assets to the bankruptcy trustee. The most common debts that are eliminated in this type of bankruptcy are credit card debt, repossession deficiencies on vehicle loans, and medical bills. All non-exempt assets become property of the bankruptcy estate, and may be liquidated by the bankruptcy trustee. The proceeds of the sale will be distributed among your creditors.
Chapter 11 bankruptcy allows filers to reorganize their debts under federal bankruptcy law, and is available to every business, whether established as a sole proprietorship or corporation, and also to individuals, although it is usually used by corporate entities. (Generally, Chapter 13 bankruptcy provides a reorganization process for private individuals–see below.) During Chapter 11 bankruptcy proceedings, the debtor usually remains in control of business operations as a debtor in possession, subject to the oversight and jurisdiction of the bankruptcy court.
In a Chapter 13 bankruptcy, the debtor establishes a full or partial repayment plan that is administered by the bankruptcy trustee. As a result of establishing a three to five year consolidated repayment plan, a Chapter 13 debtor will generally receive a partial or full discharge of their unsecured debt. The debtor will then make monthly payments to the bankruptcy trustee, and the trustee will distribute those payments to the creditors.
Please see our bankruptcy page for more information about our services in this area.