You Can Still File Bankruptcy!

The new bankruptcy law that went into effect in October 2005 does not prevent anyone from filing a bankruptcy case.  The bankruptcy system was created and still exists to serve you.  If you are dealing with a job loss, divorce, separation, uninsured medical expense or some other financial distress, then I have good news for you.  Everyone who needs to file for bankruptcy because of a financial crisis still can.  And, I mean everyone.

Since the beginning of recorded history, societies have had a form of debt relief for people who found themselves in a financial crisis.  Debt forgiveness is mentioned in the bible.  This is because people have always, and will always get into financial trouble that they cannot solve by themselves.  Our founding fathers knew this and therefore included a provision for bankruptcy laws in our Constitution.

 In spite of what some people on tv are saying, you are not a failure or an immoral person if you file for bankruptcy.  Financial problems usually  have nothing to do with having done something wrong.  People who have lost their jobs, have uninsured medical expenses, are  no longer able to work, or have incurred extraordinary expenses, such as car accidents or hurricanes, have nothing to be ashamed about.  Several of our presidents have sought the help of the bankruptcy process including Thomas Jefferson who went on to help build the University of Virginia  and Abraham Lincoln who went on to become our greatest president.  Can you imagine if they woke up every morning having to worry about paying their old debts?  Would they have been able to accomplish the great things they did? 

Some very successful people have also filed for bankruptcy, e.g. Mark Twain and  Donald Trump.  Walt Disney actually filed bankruptcy several times. Because he received a chance to start over again, ?get a fresh start in life,? he was able to create Disney Studios, Disney Land in California and Walt Disney World in Florida.  The company founded by him now employs thousands of people, has produced movies watched by millions of people, and has brought laughter and fun into our lives.

So what did the new law change?  The law now says that people making a lot of money must file a Chapter 13 bankruptcy case instead of a Chapter 7 bankruptcy case.  In a Chapter 13 case a person repays some or all their debts out of future income under court supervision. What does this really mean to you?  If you are a family of four and earn less than $102,894 in New Jersey, $88,409 in Delaware or $77,590 in Pennsylvania, then this part of the new law does not even apply to you.

In most  Chapter 7 cases  debts are forgiven for credit cards, medical bills, and short- falls on car repossessions and foreclosures.

The new law changed some other aspects of the bankruptcy process.  Here is a brief summary of the more significant changes:

  1. If you filed bankruptcy before, then you have to wait eight years instead of six years to file again.

  2. If you filed recently and had your case dismissed, then you get fewer protections under the new law if you file again.

  3. You have to participate in a 90 minute credit counseling session at a cost of about $50.00 before you can file a bankruptcy petition.

  4. Money owed to an ex-spouse  arising out of a divorce  will not be forgiven.

  5. You must participate in a debt management course at a cost of $50 at the end of your bankruptcy case.

You can still use a bankruptcy filing to do many good things for you.   The three most important ones are:

  1. Discharge (wipe out) debts such as credit cards, medical bills,  back rent,  and deficiencies (short falls) on foreclosures and car repossessions,

  2. Stop wage garnishments, sheriff sales,  lawsuits against you, and the calls from creditors or collection agencies

  3. Start over again, by putting your past financial problems behind you.

The bankruptcy courts are still open to people who have found themselves in a financial crisis. In many cases filing for bankruptcy is the only moral option open for people being crushed by debt, and harassed by creditors.  Filing for bankruptcy makes it possible for people to have a fresh start in creating a different and more fulfilling future.

John W. Hargrave, Esq.

Practice focused on bankruptcy field since 1982

United States Bankruptcy Trustee since 1985 (one of only 1200 bankruptcy trustees in the nation)

Practicing law since 1977

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