The entire bankruptcy process, when it comes to an individual consumer debtor, has one major purpose, that is to give the financially challenged consumer a “fresh start”. While many creditors representatives and debt collectors have spent years attempting to influence the politicians and the public that anyone who files bankruptcy must have some moral flaw, we have found, in over thirty years of representing clients, that financial problems come from many, many sources. Divorce … Illness .. the death of a loved one, and yes, occasionally an inability to manage finances, but rarely do we see someone trying “game the system”. It is almost always just hard working people trying to recover from financial difficulties.
But just as there is on one source of financial problems, then is no one bankruptcy solution to those problems either. In fact many times bankruptcy is not the answer. In the following presentation we will discuss the substance of the different bankruptcy types, a Chapter 7, a Chapter 11 and a Chapter 13 … and give you an overview of the process that each type of case takes. You may also wish to review our Frequently Asked Questions or “FAQ’s” for the top questions we have encountered from clients over the years.
Since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Protection Act of 2005, an debtor with primarily consumer debt is required to satisfy a “Means Test” formula to file a Chapter 7 bankruptcy and a similar formula controls the level of the potential payment in a Chapter 13 Plan. It should be noted that the when the Republican controlled congress enacted the BAPCPA it required debtors whose debts were consumer in nature to meet the means test, but those debtors whose debts were substantially “business debt” did not. What that means is that a person fails in starting a exotic dancing club can discharge those debt in bankruptcy, but a person faced with large personal or family medical bills could not. The BAPCPA was opposed by a large number of legal scholars and many consumer organization. The supporters, mostly credit card companies, collection companies and banks argued that the bill would reduce banking losses and thereby reduce prices for consumers. In reality, post BAPCPA, banking losses did fall, but prices to consumers rose significantly and banking profits rose sharply. In short the BAPCPA had little “consumer protection” effect, but a significant positive effect on the bottom line of large banks. You may review the Means Test and its application to your personal situation here.
Normally most consumer bankruptcy cases follow a fairly predictable process as described here.