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Ask Dr. Don
By
Don
Taylor,
Ph.D.,
CFA
•
Bankrate.com |
Filing for bankruptcy
Dear Dr. Don,
What paperwork do I need to file a joint bankruptcy? What bills
can I put on the bankruptcy petition?
Thanks,
Kraig Knotty
Dear Kraig,
Once you've decided to file for bankruptcy, your next decision is
whether you're going to hire a bankruptcy attorney to help you through
this process or try to do it on your own. For most people it makes
sense to hire an attorney that specializes in bankruptcy cases.
The Bankruptcy Judges Division's Public Information
Series pamphlet titled Bankruptcy
Basics provides an excellent overview of the process. The U.S.
Courts Web site also provides a listing of official
bankruptcy forms. Use its court
links site to find the bankruptcy court that will have jurisdiction
over your petition. Be sure to pay attention to the local-rules
requirements of the court.
Most consumers file either a Chapter 7 or a Chapter
13 bankruptcy petition. Chapter 7 is a liquidating bankruptcy where
the court liquidates the assets in the bankruptcy estate and uses
the proceeds to pay your creditors. Exempt assets aren't part of
the bankruptcy estate and remain your property. State law and court
practice will determine the amount of flexibility you have in keeping
assets out of the bankruptcy estate.
In contrast, a Chapter 13 bankruptcy is a reorganization
plan where you work with the court to establish a repayment plan
over the next three to five years to pay your creditors. The court
determines what portion of eligible debt has to be repaid. It can
be a better approach if you don't want to lose nonexempt assets
and can give you a lot more flexibility.
The decision to file jointly or as an individual is
influenced by whether the debts are joint obligations and whether
you live in a community-property state. The nine community-property
states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico,
Texas, Washington and Wisconsin.
All debts of the petitioners will be listed in the
bankruptcy filing. Not all debts are eligible for discharge in bankruptcy,
but all must be listed in the filing. The court has to have a full
accounting of your indebtedness to render a fair decision about
how your creditors will be paid.
Some debts that aren't eligible to be discharged in
a Chapter 7 filing may, however, be eligible for discharge in a
Chapter 13 filing. Don't make the mistake of filing for bankruptcy
only to find out that the debts you need to have discharged aren't
eligible to be discharged. This Bankrate feature lists debts
you can't discharge in a Chapter 7 bankruptcy filing as:
- Most student loans
- Alimony
- Child support
- Debts incurred through fraud
- Liabilities resulting from drunk driving
- Criminal fees, penalties and restitution
After almost a year, it looks like the House and the
Senate will settle their differences and send the bankruptcy reform
legislation on to President Bush for his signature. The new law
will become effective 180 days after President Bush signs it into
law. It will become more difficult to successfully petition the
court for the discharge of your debts.
If you're sure that bankruptcy is the right decision
for you, then you should consider filing before the effective date
of the new law.
-- Posted: Aug. 23, 2002
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