Bankruptcy Law

Because a fresh start is the only kind of start...


Bankruptcy is an ever-changing field of law. Recent legislative changes have made it more difficult to file bankruptcy, but still allow for most individuals to file bankruptcy. The need for bankruptcy, however, still exists. The increased costs of medical care, combined with declining wages and an uncertain job market, mean that debt often becomes too much for a family to bear. Given these circumstances, a family has only a few options -- sell the family home, get a second or third job, or declare bankruptcy. When you declare bankruptcy, you are making a legal statement that your debt and expenses exceed your income.

Bankruptcy is not a bad or negative thing. It is a financial decision. Corporations do it everyday. United Airlines, K-Mart, and MCI are just a few of the companies that declared bankruptcy. Declaring bankruptcy is better than making your family suffer or losing your family home. Bankruptcy is a right in our Constitution and it is also mentioned and supported in the Bible. Even in the Biblical Days, creditors were trying to take advantage of helpless debtors.

There are two types of bankruptcy generally filed by consumers: Chapter 7 and Chapter 13. Summaries of each are included below.

chapter 7

  • Also called liquidation bankruptcy
  • In most situations keep your home
  • Credit card debt is eliminated
  • Medical bills are eliminated
  • Allows you to get a fresh start
  • Credit repair often happens in less than two years

chapter 13

  • Debt is reorganized
  • Foreclosures are stopped
  • You can make up back payments on your mortgage on a 3 year payment plan
  • You pay as little as 20% of your credit card/medical debt on the 3 year payment plan

bankruptcy example #1

  • A single man has a home that is 4 months behind on the mortgage. His monthly payment is $700. Therefore, he is $2100 behind. Plus, the mortgage company has started foreclosure proceedings and there is another $1000 in attorney fees for the mortgage company. Thus, the single man is $3100 behind on the mortgage. He must pay this in full or his mortgage company will FORECLOSURE and will EVICT him from HIS HOME. In addition, he has $20,000 in credit card debt and $5,000 in medical bills. However, he does have a stable job and if given the chance, would be able to make his mortgage payment of $700 again.
  • Under a Chapter 13 Bankruptcy, the gentleman would pay perhaps 20% of his credit card and medical debt. $25,000 x 20% = $5,000. Add on the $3,100 and this is a total of $8,100. If we spread this out over 3 years (36 months), we get a monthly payment of $225 per month. The gentleman starts making his monthly mortgage payments and all his other debt is taken care of with his bankruptcy. The important thing is, HE KEEPS THE HOUSE!!

bankruptcy example #2

  • A single woman has $30,000 in credit card debt and is currently renting an apartment. Assuming she doesn't have a large amount of property, she can walk away from the debt and start fresh if she files a Chapter 7 Bankruptcy.

bankruptcy example #3

  • A husband and wife have very little assets but they are current on mortgage payments for their family home, which has $30,000 equity. They owe $50,000 in credit card debt, but because the wife has lost her job, they cannot make mortgage payments and credit card payments. If they file a Chapter 7 Bankruptcy, they can keep their house, get rid of their debt and start fresh. Sound too good to be true? It's the law.