INTRODUCTION TO BANKRUPTCY

In ancient times, if you were not able to pay your debts you were sold into slavery or thrown in jail until the creditor was satisfied you paid your dues with slavery services or jail time. Over time, as society made economic advances, it was generally agreed that society does not benefit from imprisoning debtors. Laws were developed to regulate debtor-creditor relationships. In the United States laws regarding bankruptcy were first passed around 1800. Modern bankruptcy laws are based on major changes that occurred in 1978. Bankruptcy laws have gone through changes since then and the most recent major changes occurred in 2005.

Many famous Americans filed for bankruptcy protection. For example, Thomas Jefferson, author of the Declaration of Independence, filed for bankruptcy three times in his lifetime. Other famous Americans that filed for bankruptcy include Daniel Boone, Abraham Lincoln, Ulysses Grant, Mark Twain, Henry Ford, Walt Disney, Harry Truman, Donald Trump (not personally, but several of his businesses have filed), Larry King, Johnny Unitas, Willie Nelson, Meatloaf, Burt Reynolds, Kim Bassinger, and of course, Michael Jackson. Just do a quick search on the internet and you will find many more famous bankruptcies.

We live in a capitalist system and bankruptcies are a necessary part of a healthy capitalist system. Capitalism is what allows you to purchase on credit. Have you thought how things would be different if you have to pay cash for everything? How long before you save $16,000 to buy a car with cash? Or what about paying for college or buying a house in a single cash payment? In addition, venture capitalists, who invest in economic enterprises, are one of the principal components of our economic system. The same way that without a Federal Deposit Insurance Corporation (FDIC) people would be more uneasy about depositing their savings in a bank, without a bankruptcy law, people would not be as likely to undertake new business ventures. There are many talks about bailouts for Wall Street. Bankruptcy is the bail out for you. It is a powerful tool that the system provides you to get rid of debt and get a fresh start in life.

There are many reasons why someone may be in need of bankruptcy protection. Not all persons filing for bankruptcy do it because they wasted their money in vices. A business that failed, a divorce, being laid-off from work, an injury, illness, medical bills, an accident that cause you to loose time at work or leaves you incapacitated and with lower income are all situations that may force you into bankruptcy.

There are two bankruptcy chapters or types of bankruptcies available to consumers. The two types are Chapter 7 liquidation and Chapter 13 reorganization. A free consultation with your Legal Helpers or Macey and Aleman attorneys will help you determine which alternative is best for you.

One more thing that is good to know about bankruptcy; It is not an “all or nothing” game, it is a “pick and choose” game. In other words, in the vast majority of cases, you can file bankruptcy on some debts and retain others. For example, you can file bankruptcy on your medical bills and credit cards while retaining the house mortgage and the car. This is called “reaffirming” the debt. It is a great relief for many people, to know that they can file for bankruptcy and still keep their house and/or car.

Lastly, it is important that you provide the attorney with the basic required information, particularly all your possessions and assets. It is true that in a bankruptcy, a trustee gets appointed to take over your property but what that really means is that the trustee has the right to access your property. The Bankruptcy Code provides for exemptions that protect basic property. The exemptions are very generous. Chances are that you will be able to get rid of all your debt while preserving all or most of your property. Unless you have a Rolex watch or a golden toilet, you do not have much to fear about losing property in bankruptcy. Our attorneys make sure that your property is protected and if there is anything exposed, we will let you know, and work with you on how to deal with it. We do not file the case until you have reviewed the petition and have approved of the strategies.

After the filing of the petition, you will have to appear at a hearing, more like an office meeting really that lasts about 10 minutes in most cases. A trustee presides over the meeting and your Legal Helpers / Macey & Aleman attorney will be there for you. Trustees usually treat you respectfully and with dignity. After all, this is a business proposition, not a lynching!

After the hearing, the next step is that the trustee must file a report to the court. Either a “No Asset” or “No Distribution Report” or a “Report of Distribution” is filed by the trustee. This is the biggest hurdle. This is the report in which the trustee declares that he has reviewed the assets of the debtor, inquired about them and after due scrutiny concluded that there is nothing to liquidate for the benefit of the creditors. In the vast majority of filings, this is the case. After this stage, the case moves on to the Judge proceeds to order the discharge of debt. The last phase is when the case is closed. The whole process takes about 4 months and all along your Legal Helpers / Macey & Aleman attorney will be with you every step of the way.

Read Bankruptcy Myths