Bankruptcy filings are far from uncommon in today’s economy. Many, many Americans are finding themselves under mountains of debt with interest rates and late penalties piling up on principle, making repayment an impossibility.

Bankruptcy may provide an avenue for relief. The United States Bankruptcy Code was intended to help honest people, who have made honest decisions and honest efforts, but who find themselves unable to resurface from under all the debt without help.

The Good Results and the Bad Results of Bankruptcy

Bankruptcy gives people a fresh start. After a bankruptcy, your credit report will reflect your bankruptcy filing for up to ten years. However, bankruptcy also gives you an opportunity to begin establishing new credit and timely pay new debt in order to amend the detriment to your credit score over time.

Bankruptcy Documents are Filed in Federal Court by the Debtor

Bankruptcies are filed in federal, and not state, courts. There are federal bankruptcy courts all over the country.

A bankruptcy case normally begins by the debtor filing a petition with the bankruptcy court. A petition may be filed by an individual, by a husband and wife together, or by a corporation or other entity.

The debtor is also required to file statements listing assets, income, liabilities, and the names and addresses of all creditors and how much they are owed.

The Effect of Bankruptcy Filings

The filing of the petition automatically prevents, or “stays,” debt collection actions against the debtor and the debtor’s property. As long as the stay remains in effect, creditors cannot bring or continue lawsuits, make wage garnishments, or even make telephone calls demanding payment.

Creditors receive notice from the clerk of court that the debtor has filed a bankruptcy petition.

Contested and Uncontested Filings

Some bankruptcy cases are filed to allow a debtor to reorganize and establish a plan to repay creditors, while other cases involve liquidation of the debtor’s property. In many bankruptcy cases involving liquidation of the property of individual consumers, there is little or no money available from the debtor’s estate to pay creditors. As a result, in these cases, there are few issues or disputes, and the debtor is normally granted a “discharge” of most debts without objection. This means that the debtor will no longer be personally liable for repaying the debts.

Occasionally there will be disputes and disagreements leading to bankruptcy litigation. These disputes may include disputes over ownership of property, the value of an asset, the amount of debt, whether debts are dischargeable or nondischargeable, and what amounts the involved lawyers, accountants, etc. should receive. These disputes are handled in a very similar manner as any other civil lawsuit. Information will be requested and must change hands, and settlement may be explored. If a settlement is not reached, there may be a trial on the ultimate issues of the case. There are also bankruptcy appeal procedures.