Bankruptcy
The business and civil litigation lawyers at the law office of Poelman & Langa have been helping individual debtors with bankruptcy proceedings in Wailuku and throughout Maui for nearly twenty years. Our legal staff has the knowledge and experience to help you determine which type of proceeding is best for your circumstances, whether Chapter 7 or Chapter 13.
Chapter 7
The most common type of bankruptcy for an individual debtor is Chapter 7, also known as liquidation or straight bankruptcy. Under Chapter 7, all of the debtor's non-exempt assets are sold, and the proceeds are used to pay off debtors in priority order. Any remaining debts are discharged by the bankruptcy court, meaning the debtor is no longer responsible for repaying them.
Chapter 7 is most appropriate for individuals facing extreme, especially unsecured, debts. Most major credit cards are unsecured; while the debt may continue to accrue, there is no specific asset the credit card company can go after as security for the debt on the card.
Exempt Assets
Only non-exempt assets are sold in a bankruptcy. Exempt assets typically include a portion of the equity you have built in your home and car, and sometimes clothes, jewelry, household items, and tools of the trade. Certain payments, such as spousal or child support, personal injury, or disability payments, are also generally exempted. The exact exemptions and amounts differ from jurisdiction to jurisdiction and depend on whether you are using state or federal exemptions.
Non-dischargeable Debt
Not all debts are dischargeable in bankruptcy. Even if you file a Chapter 7 bankruptcy, you will still be liable to pay certain items, such as:
- Taxes
- Student loans
- Criminal fines, court fees, and judgments
- Civil personal injury judgments against you
- Spousal support (alimony or maintenance) and child support payments
These are only some examples of non-dischargeable debt, and even with these examples, there are certain exceptions and rules that may make some of the debt dischargeable. A knowledgeable bankruptcy lawyer will be able to tell you which of your debts are dischargeable in a Chapter 7 bankruptcy.
Chapter 13
Under a Chapter 13 bankruptcy, the debtor develops a repayment plan designed to pay off existing debts over a period of three to five years. Once approved by the court, the plan is enforceable against the creditors, who must accept payment according to the plan. Creditors will have notice of the proceeding and a chance to object to the plan before it is finalized. This type of bankruptcy is most appropriate for a debtor who has a steady stream of income, and whose debts are not so insurmountable that a repayment plan would not be feasible.
Choosing the Best Option
Bankruptcy may not be for everybody. A Chapter 13 bankruptcy remains on one's credit report for seven years, and a Chapter 7 remains for ten years. Even beyond that period, bankruptcy can make it more difficult to obtain a loan, and can come up when applying for a new job. Sometimes alternative methods of debt management may be possible, allowing individuals to regain control of their financial situation without the stigma or negative consequences a bankruptcy can sometimes bring. A qualified and experienced bankruptcy attorney can explore these options with you and help you determine the best recourse for your given situation.
If you are concerned about mounting debt and are considering filing for bankruptcy, contact the law office of Poelman & Langa today to discuss your options.
