What is Bankruptcy?

Young man sitting in wheelchair

Bankruptcy is a legal proceeding in which a person, or a married couple, who cannot pay their bills can get a fresh financial start. Filing bankruptcy immediately stops your creditors from calling you, writing you, suing you, and seeking to collect debts from you, at least until your debts are sorted out according to the law. The right to file for bankruptcy is authorized by federal law.

In a Bankruptcy you can:

  • Eliminate the legal obligation to pay most, if not all, of your unsecured debts. An unsecured creditor is a creditor who does NOT hold a lien on any of your property. Examples are credit card debts and medical bills. A bankruptcy gives you a “discharge” of debts and gives you a new financial start.
  • Stop foreclosure on your home and if you can afford to keep the home, you can have the opportunity to catch up on missed payments.
  • Catch up on payments for property serving as collateral with secured creditors. A secured creditor is a creditor who has a lien on your property, such as an automobile or house.
  • Prevent repossession of a car or other property, and possibly force the creditor to return property even after it has been repossessed.
  • Keep and protect property of various types within available State and Federal “exemptions”. Exemptions are categories of property you are allowed to keep under the law, even though you have filed bankruptcy.
  • Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
  • Restore or prevent termination of certain types of utility service.
  • Allow you to challenge the claims of creditors who have committed fraud or who otherwise are trying to collect more than you really owe.