The Credit Counseling Professionals

This section provides information about bankruptcy but is not the same as legal advice (the application of law to an individual's specific circumstances). We recommend you consult a lawyer if you want assistance with bankruptcy. ACCC does not provide pre-bankruptcy counseling or debtor education.

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, people who plan to file for bankruptcy protection, with limited exceptions, must get credit counseling from a government-approved organization within six months before they file. They also must complete a debtor education course from an approved provider to have their debts discharged.

To locate an approved pre-bankruptcy agency and also a post debtor education agency, visit the U.S. Trustees Program at www.usdoj.gov/ust. By law, the U.S. Trustee Program does not operate in Alabama and North Carolina; in these states, court officials called Bankruptcy Administrators approve pre-bankruptcy credit counseling organizations and pre-discharge debtor education course providers.

If you are thinking of Bankruptcy consider these facts:

What is Bankruptcy?

Bankruptcy is a proceeding in a federal court in which an insolvent debtor's assets are liquidated and the debtor is relieved of further liability. Chapter 7 deals with liquidation, while Chapter 13 deals with reorganization. If you have questions concerning bankruptcy, you should seek the advice of a licensed bankruptcy attorney. Also, see
www.uscourts.gov/bankruptcycourts/bankruptcybasics/process.html

Types of Bankruptcy

Chapter 7 bankruptcy is when the court appoints a Trustee who may liquidate or sell some things that you own to pay your creditors. Most of your debt will be canceled, but you may choose to pay some creditors, usually to keep a car or home in which the creditor has a lien.

Chapter 13 bankruptcy is when your debt is reorganized into a single monthly payment. The payment will continue for 36 to 60 months. In no case may a plan provide for payments over a period longer than five years. You do not have to repay all of your debt. You pay only as much as you can afford, but the minimum payment may be affected by property you want to keep. When you complete the payments, debt not paid is discharged.

Advantages and Disadvantages of filing for Bankruptcy

Advantages of bankruptcy:

• One of the most important advantages of filing for bankruptcy is that debtors may obtain a fresh financial start.
• If you are eligible for Chapter 7 you may be forgiven (discharged from) most unsecured debts. A secured debt is one which the creditor is entitled to collect by seizing and selling certain assets of the debtor if payments are missed, such as a home mortgage or car loan.
• You may be able to keep (that is, exempt) many of your assets, although state laws vary widely in defining which assets you may keep.
• Collection efforts must stop as soon as you file for bankruptcy under Chapter 7 or Chapter 13.
• You cannot be fired from your job solely because you filed for bankruptcy.

Disadvantages of bankruptcy:

• A bankruptcy can remain on your credit record for 7-10 years and can affect your future finances.
• A bankruptcy may impede your chances of getting a mortgage or car loan for some time.
• Not all debt will be discharged. Some debt that cannot be discharged is child support, alimony, some student loans, divorce settlements and some income taxes. You should check with an attorney on the specific categories of debt that will be allowed for discharge.

Does Bankruptcy Eliminate Debt?

Filing bankruptcy does not necessarily eliminate all debts, and often simply restructures existing debts - this leaves you responsible for all future payments. Filing bankruptcy also stays with you for up to 10 years and you may have difficulty getting any type of loan. Bankruptcy is public record and will be reflected on your credit report but not permanently.

Is Bankruptcy the Best Solution?

Anyone who is considering bankruptcy needs to fully understand the process and the laws surrounding bankruptcy. Questions about bankruptcy should be addressed by a licensed bankruptcy attorney.

Alternatives to Bankruptcy

There are alternatives to bankruptcy and you can avoid bankruptcy with outside help. It is important to get early advice about bankruptcy if you are hoping to use the bankruptcy process to save your home or your car.

To locate an approved pre-bankruptcy agency and also a post debtor education agency, you visit the U.S. Trustees Program at www.usdoj.gov/ust. By law, the U.S. Trustee Program does not operate in Alabama and North Carolina; in these states, court officials called Bankruptcy Administrators approve pre-bankruptcy credit counseling organizations and pre-discharge debtor education course providers.

Click here for more information on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Looking for a Bankruptcy Attorney

Are you looking for bankruptcy information or to locate an attorney in your area? There are a number of methods to find legal counsel, including your local bar association. NACBA is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. For more information go to: www.nacba.org or to select a bankruptcy attorney by location go to:
Attorney Finder: ecomm.nacba.org

*ACCC provides links to other services but does not endorse non-ACCC websites or validate their content.

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