How Filing Personal Bankruptcy Is Different Than Business Bankruptcy

Within every section of the law there are subsections with different rules than the ones before.
The laws that govern bankruptcy are no different; there are separate chapters that can be filed and different rules for each chapter. The laws are sometimes so complex that certain attorneys only specify in one type of bankruptcy. If you are thinking about a hiring a bankruptcy attorney or even filing a do it yourself bankruptcy it is typical that you will be faced with sifting through information about the different types of bankruptcy. Here is some helpful information that highlights some of the differences between the various types of personal and and business bankruptcy:

1. Chapter 7 bankruptcy – This is the most common type of personal bankruptcy filed by either individuals or married couples. Businesses do not have the option to file Chapter 7 bankruptcy. In most cases Chapter 7 bankruptcy forms are used to erase large amounts of unsecured debt such as credit card debt and medical bills. It is typically beneficial for individuals or married couples that have little or no assets that could potentially be liquidated by the bankruptcy court in order to pay off some of their creditors.

2. Chapter 13 bankruptcy
 – This is the second type of personal bankruptcy available to individuals or married couples. Businesses also do not have the option to file Chapter 13 bankruptcy. In most cases filing the necessary Chapter 13 bankruptcy forms allows the debtor to take part in a 3-5 year repayment plan that encompasses a percentage of their overall unsecured debt. The percentage of debt involved in a Chapter 13 repayment plan can range from 10%-100% and is calculated by using the debtors disposable monthly income.

3. Chapter 11 bankruptcy – This type of bankruptcy is for businesses only and works similarly to how a Chapter 13 bankruptcy works for individuals. The bankruptcy court allows businesses to “reorganize” their debt and set up a payment plan that works for the business and its creditors. The repayment plans in both Chapter 11 and Chapter 13 bankruptcies are overseen by a bankruptcy trustee that makes sure payments are made on time and are correctly given to the creditors.

Typically, attorneys utilize the bankruptcy means test to determine the chapter of bankruptcy would best suit your needs. If you own your own business and feel as though a Chapter 11 business bankruptcy would benefit you it may be in your best interest to contact an attorney that specializes in that area. Filing a business bankruptcy does not necessarily mean that your business doors will be shut forever; in fact business bankruptcies aim to get finances back in order so that the business can not only stay open, but continue to grow. Filing a business bankruptcy does not mean that you must file a personal chapter of bankruptcy too, and if you are unsure about why or why not you should.

Texas Bankruptcy Laws

Bankruptcy is federal law, so Texas technically follows the same bankruptcy laws as all the other states. However, Texas state statutes and judicial precedents control some very important aspects of filing bankruptcy in Texas. The biggest role played by the state is determining what the bankruptcy exemptions are. The Texas bankruptcy exemptions determine what assets that you are able to retain when you file a Chapter 7 bankruptcy and what percentage of your debt you are required to pay back in a Chapter 13 bankruptcy.

  • Bankruptcy exemptions determine which assets you can retain when you file a Chapter 7 bankruptcy as well as what percentage of your debt you are required to pay back in a Chapter 13 bankruptcy.
  • In Texas, bankruptcy courts are organized into four separate districts based upon location. Find the contact information for all of these Texas bankruptcy court locations.
  • Following years of intense lobbying by creditors, in 2005 the U.S. Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). See how Texas Senators Cornyn (Republican) and Hutchison (Republican) each voted on these provisions which largely favored creditors over the average U.S. consumer.
  • You are required to complete a U.S. Trustee approved credit counseling briefing before filing bankruptcy. If you’ve already filed bankruptcy, you must complete a U.S Trustee approved debtor education briefing.
  • Bankruptcy statistics in Texas don’t vary much from the national average. View the median income numbers for Texans as well as statistics for the 2005 and 2006 Texas bankruptcy filings — organized by Chapter 7, Chapter 11 or Chapter 13.
  • Receive a FREE bankruptcy evaluation with a local Texas bankruptcy attorney who can help people in Amarillo, Abilene, Dallas, Fort Worth, Lubbock, San Angelo, Wichita Falls, Tyler, Plano, Beaumont, Austin, Houston, San Antonio, Midland, Waco, El Paso, or any other Texas city.

Self-Help

Creditors’ internal policies can vary greatly, but many will agree to reduce interest rates or waive penalties upon a consumer’s direct request, particularly if the consumer has a good payment history or is viewed as a bankruptcy risk.

Bankruptcy - Self-Help 2

Some creditors are also willing to settle for a lower amount than the total amount of debt due if you are able to offer a reasonable lump sum payment. Before enrolling in programs that promise to do the same, it’s worth a shot to try and negotiate directly with your creditors.

Am I Judgment Proof?

You may be considered “judgment proof” if you have no assets or income that could be garnished or seized by your creditors. Being “judgment proof” does not mean that your creditors cannot sue you; it just means that even if they do obtain a judgment against you, there is nothing they can do to collect the money that is owed. Claiming that you are “judgment proof” in court can be risky and usually entails a lot of harassment from your creditors because you are basically telling them that you aren’t ever going to pay them back even though a court has determined that you owe them money. Without the protection of the bankruptcy code, your debts are not officially eliminated, and the Fair Debt Collection and Practices Act (FDCPA) offers much less protection than a bankruptcy automatic stay.

The Pros and Cons of Self-Help

PROS:
Low Cost
You will avoid payment of fees to third party professionals if you handle the matter yourself.
CONS:
Lack Expertise and Experience
You will not be able to take advantage of the knowledge and experience of licensed professionals who are trained to obtain the best results for you.
May Not Stop Harassment
The FDCPA provides you with some protection from your creditors, but your original creditors will still be allowed to contact and/or sue you.
Other Disadvantages
The majority of the “cons” listed above for debt negotiation or debt consolidation plans will also apply if you attempt to settle with your creditors by yourself.

Consider Self-Help Options If…

  • You are experienced and knowledgeable working with finances
  • You don’t work or own a home, car, bank accounts, or any other significant assets
  • You have a relatively small amount of debt that you can easily handle yourself
  • Your creditors are willing to work with you

10 Clever Cost-Cutting Measures to Avoid Bankruptcy

Times are tough.  Non-business bankruptcies filed in federal courts in 2010 totalled 1,593,081, up 8.1 percent from 2009.  If you live in fear of bankruptcy, now is the time to take control in the areas of your life over which you still have power.  Financial problems won’t go away overnight, but taking action empowers you to get on track.  You can always complete chapter 7 bankruptcy forms or chapter 13 bankruptcy forms before you meet with bankruptcy lawyers, but you may try cutting expenses in creative ways — it’s easier than you think.

Below is a list of common expenses identified by financial experts and credit counselors.  Many of us throw our money into these expenses without giving it a second thought.  Consider the three items on which you spend the most money – these are the areas you need to cut before looking for bankruptcy help.  If you commit yourself to cutting back, these 10 tips could help you budget to avoid bankruptcy.

1. Entertainment

This includes dining in restaurants, attending movies and going for drinks, to name a few.  These extracurricular activities are pricey and are luxuries you can do without, or you could compromise from time to time by trying the following:

Consider staying in and watching movies or playing multi-player video or board games with family or friends.  Host a pot-luck dinner where everyone brings a dish and shares the expense.  You can feed more people for less when you cook from scratch.  Everyone needs time away from the house, so seek outdoor activities or community events that are free. You can typically find these listed on your municipal home page or local radio station’s site.  If you have saved enough to splurge on seeing a movie in theatre, only go on “reel deal” night.  Many theatres have reduced ticket prices one night each week; contact your local theatre for information.  Catching a movie for less once every month or so is a good compromise – just be sure to avoid the overpriced concessions counter!
Cutting back on your entertainment budget will be a key part of your new strategy to avoid bankruptcy.

2. Clothing

There’s really no excuse to pay full retail price for brand name clothes. There are many stores that offer deeply discounted designer lines, and box stores that cater specifically to people on a tight budget and want to look stylish.  Do you live near a consignment shop?  You can buy new or gently used brand name clothes for a very small percentage of the retail price.  Another great option for families is to invite close friends, relatives and neighbors with children to come together for a clothing swap.  Kids outgrow clothes before they have a chance to wear them out, so rather than lose the investment altogether, trade them for another child’s unworn or gently used items.  Depending on how close the relationships are, the adults might be interested in trading from their closets, too.
Clothing and shoes are necessities, but once you get accustomed to making room for only the essential items, your clothing budget will no longer be a contributor to your risk of declaring bankrupt.

3. Coffee/ Specialty Coffee

Coffee drinkers are known to splurge on their daily “fix.”  This typically runs anywhere from $1-5 per cup, depending on where you buy it. That can add up to $20-100 per month.  Many workplaces have tea and coffee available for the staff at break periods – take advantage of that perk! If the office beverages are not to your liking, bring you own packages of herbal tea or a favorite coffee roast from home. This way, you can enjoy your “fix” for pennies a cup.

4. Work Lunches

When it comes to work, pack your own lunch and healthy snacks.  It’s healthier for your wallet and might benefit your waistline, too.  Grabbing $10-20 of cafeteria food or take-out each day will cost you upwards of $50-100 per week, or $200-400 per month.  You can do without that expense.  If you have school-aged kids, get them involved too!  They will feel good about helping to bring positive changes to the family.  From now on, you’re all going to “brown bag” it.
Cutting non-essentials such as take away lunches and specialty coffees from your list of approved expenses is an effective budget tip to avoid bankruptcy.

5. Cabs

Like take-out lunches, cabs only appear “essential” when you didn’t take the time to plan ahead to make other arrangements.  If you cannot walk to your destination, leave earlier so you can make your connections on the bus or subway.  If public transportation isn’t available in your area, carpool with a coworker, or ask family or friends to give you a lift.

6. Transportation

Public transit is smart, efficient and cost-effective compared to the costs of owning and maintaining a vehicle.  If you require a vehicle for your job, take turns carpooling with a coworker to cut fuel costs by half. I live in an rural area where there are no busses, so I had to get creative to cut transportation costs.  I save all my errands and run them at once.  I’ve let my friends and family know that if they are considering getting me a gift for my birthday or holidays, I’d love the gift of gas cards for topping up my tank at the service station.

In addition to using public transportation and carpooling to cut transportation costs, you may also need to consider purchasing a less expensive vehicle, or reducing the number of family vehicles to one.  The key to success when budgeting to avoid bankruptcy is to compromise wherever possible.

7. Beauty products/ makeup

Department store brands are beautiful but they fall squarely in the luxury category.  You can’t justify paying high-end prices when you’re cutting expenses.  I learned in university that the best value can be found in popular drugstore brands.  Drugstores carry a huge assortment of beauty products that do a great job and are gentle and animal cruelty-free. Most drugstores have great loyalty rewards programs, so you earn deep discounts or free products as you shop over time.  Win-win!

8. Gym membership

If you have a membership you don’t use, find out if you can give it up early or transfer it to another person.  If you’re going on vacation, ask if you can get a refund for the time your membership will not be in use.  Do a quick online search to find free fitness clubs and classes in your area, and spend more time outdoors.
Luxury items such as high-end makeup and gym memberships are usually among the first things to be stricken from a budget when an individual is facing filing bankrupt.

9. Groceries

Food costs are high, but there is a lot of competition among grocery retailers that will benefit you if you do your homework.  In addition to strictly avoiding high-end and overpriced grocery stores, your best bet is to spend time at home with sales flyers and make a grocery list of bargains you find – and only buy what is on your list.  Also, if there are no coupons in your sales flyers, every grocery store has coupons posted in a highly visible area.  Make use of them!

10. Rent

Everyone needs a roof to sleep under, so this may call for a compromise. To find ways to subsidize your rent or mortgage costs, get a roommate.  Do you have a spare room that could bring in extra cash?  If not, begin looking for a cheaper place, or a place that will lower costs for you in other areas.  This can include lower rent or mortgage costs, lower heating costs, or a better transit system so you can leave your car at home and save the costs of fuel and regular wear and tear on your vehicle.
Food and housing costs are essential items in your budget and now you have strategies to empower you to get these expenses back on track. Taking the time to plan your meals around sales in the flyers will help you cut food expenses in your budget and downsizing your housing or sharing housing costs with another tenant are compromises that could divert you from scheduling a meeting with bankruptcy lawyers.

Commit yourself to cutting back, and integrate the above 10 tips into your budget to avoid bankruptcy.

Top 5 Surprising Bankruptcies

It’s easy to get bogged down and discouraged when you think that you are the only one dealing with the decision to declare bankruptcy. It may be encouraging to know that some of history’s most successful names dealt with the same struggle you may be dealing with today. Bankruptcies can happen to anyone, and if you don’t believe me just take a look at some of these names.

  1. Abraham Lincoln: Our revered 16th president fell into overwhelming debt because of a failed general store he opened in 1823. He owed about $1,000 after the store closed and he didn’t have the money so his creditors took him to court and won the right to his last valuable assets: a horse and some surveying gear.
  2. H.J. Heinz: If it wasn’t for the ideas dreamed up by H.J. Heinz all of our hot dogs, hamburgers, and french fries would be lacking to say the least. The condiment king was only 25 years old when his struggling business failed to sell enough of a horseradish sauce to pay the bills. The company declared bankruptcy in 1875.
  3. Milton Hershey: America’s favorite chocolatier knew that his candy was great, but unfortunately didn’t quite know how to run a business. In 1882 his first candy shop attempt in Philadelphia fell because he couldn’t cover the expenses any longer. He decided to declare bankruptcy and head back home to Lancaster, PA to try again.
  4. Henry Ford: Although Henry Ford was a mechanical innovator, even he couldn’t stay away from the financial struggles that come with a failed business. He started his first motor company in 1899 and because of his need for perfection the company had only produced 20 vehicles in a years time. The business owed much more than it made that year and went bankrupt in 1901.
  5. Walt Disney: Many of us owe countless family vacations and memories to Walt Disney, but at the start of his career he owed his creditors more than he had. Walt Disney opened his first film studio in Kansas City in 1922 and barely kept it alive for a year. After a failed deal with a New York company that promised to distribute his films, Walt didn’t even have enough money to cover his small overhead. The studio ended up going bankruptin 1923.

There are startling similarities between all five of these men: each one struggled financially, each one filed bankruptcy, and each one of them went on to be wildly successful. Although this isn’t a guaranteed recipe for success, it does show that going bankrupt can put you back on track financially. So find the best bankruptcy lawyer for your situation (keeping in mind that there are cheap bankruptcy lawyers available) and ask “how does bankruptcy work?” If you discover that it may be in your best interest to declare bankruptcy, remember that you aren’t the only one to struggle, and you will come out of the process with a fresh financial future.

Chapter 7 Case Studies

Hypothetical #1: Jane Filer

Jane is a 64 year-old retired grandmother. Jane worked for 30 years and has a small pension and collects social security totaling $1,500 per month. Jane rents her home, and is financing her car. Jane is having difficulties making her car payments because she has a lot of credit card debt — almost $18,000 total. Jane wouldn’t mind giving her car back to the creditor as long as she could eliminate the debt she owes on it. Jane doesn’t have any money in the bank or any significant assets. She realizes she’ll never be able to afford to repay all her debt and wants to put a stop to all the collection letters and harassing phone calls before it progresses to lawsuits and other aggressive collection activities.

Analysis

In this hypothetical, Jane would qualify for Chapter 7 bankruptcy. Her income is under the average median income of any state, and she has no assets that could be sold to pay off her debts. Jane would be able to eliminate her credit card debt and give the car back without owing the finance company any money. Jane may also decide to keep the car if she thinks that she can now afford it after eliminating all of her credit card debts.

In this example, Jane would be able to eliminate her credit card debt and give the car back without owing the finance company any money.Hypothetical #2: Joe and Mary Filer

Joe and Mary Filer are a married couple with three dependent children. Dennis makes $45,000 annually and Pamela makes $30,000 annually. They are homeowners and have a first mortgage and a home equity loan that was used to pay off some prior credit card debts. Their house is located in Chicago, IL and has a fair market value of $150,000, with mortgages totaling $140,000. They are also financing 2 cars, which have payments that are up-to-date. They are finding it difficult to pay their mortgage, home equity loan, car payments, credit card bills, medical bills, and all their living expenses. Joe and Mary would like an opportunity to eliminate some of their debt, but they want to keep their house and cars. With all their monthly debt obligations, they don’t have the ability to put money aside for their children’s college fund or other long-term goals.

Analysis

Joe and Mary can file a Chapter 7 bankruptcy. The Illinois bankruptcy exemptions protect the equity that is left in their house, and that their total annual income is under the median income for a family of 5 in Illinois. Joe and Mary would be able to keep their house and 2 cars if they continue to make their mortgage, home equity, and auto payments. They could eliminate their credit card debts, medical bills, and any other unsecured loans.

Reasons Your Bankruptcy Could be Denied

Many people who file bankruptcy are unaware of the fact that their case could be denied. Most debtors just assume that the court will grant them the bankruptcy they desire as long as they meet all of the eligibility requirements. This, however, is not the case. There are several reasons that your bankruptcy could be denied, and if you or someone you know is considering bankruptcy then these are reasons that you will want to know. Here are just three of the main reasons why people’s bankruptcies get denied.

  1. Documents – Bankruptcy revolves around the debtors financial situation, and because of this the debtor will be required to present certain documentation to their attorney’s and ultimately to the bankruptcy court. Some of the most commonly requested documents are: paycheck stubs, bank statements, mortgage info, vehicle leases, and prior year’s tax returns. The majority of the paperwork will be requested by your attorney in order to create your bankruptcy petition, but in some cases the bankruptcy court will request documents form you directly. If, for some reason, you provide incorrect or insufficient documents to the bankruptcy court they have the right to deny your case.
  2. Timing – One thing is for sure if you do decide to file Chapter 7 or Chapter 13 bankruptcy; you will not be the only one filing. The courts are jammed full of petitions to consider, and allowing every debtor the ability to extend deadlines would push decisions back months, if not years. In multiple instances, federal and local courts have ruled that they do not possess the authority to cure an untimely bankruptcy filing. If you fail to meet a deadline that the bankruptcy court has set for your case, then that is grounds for dismissal.
  3. Fraud – When you stand before the bankruptcy trustee at your required bankruptcy court appearance they will ask you simple questions regarding your case and financial situation. These questions are to ensure that no fraud has taken place. Fraud in a bankruptcy could mean neglecting to list a creditor or debt, not telling your attorney about money you have in other accounts, or not admitting to being eligible for money like an inheritance once your bankruptcy is complete. Bankruptcy fraud is taken seriously and most bankruptcy judges have no problem denying the case on those grounds. In some severe cases where fraud is proven the bankruptcy trustee has the right to make sure the debtor can never file bankruptcy on those certain debts again.

Bankruptcy dismissals and denials are not an hourly occurrence, but they are something to be mindful of nonetheless. If you are serious about using bankruptcy to become debt free then you should do everything you can to make sure it does not get denied. Stay organized, aware, and in contact with your attorney every step of the way to make sure that your bankruptcy is completed smoothly so you can finally be on your way to financial freedom.

How to Handle Creditors During Bankruptcy

With all the preparation that comes with going bankrupt, it can be easy to forget a step or two. That’s a great reason to hire a bankruptcy lawyer to help you along they way if you happen to get frazzled and forget what to do. When you find the best bankruptcy lawyer for you be sure to keep their office number handy throughout the entire process. In most cases even if they cannot speak with you directly, a legal assistant or paralegal can answer questions about your case. While I was working as a bankruptcy paralegal one of the most common questions that clients called in to ask was “what do I tell my creditors that keep calling me?”

The answer is ultimately two-fold, depending on the type of creditor that is contacting you. Typically creditors fall into two categories: original and third party. An original creditor is one that your debt originally started with such as the credit card company or a hospital. Unfortunately, original creditors have a right to contact you by until the day your personal bankruptcy is officially filed with the court, and even the best bankruptcy lawyer can’t stop that. When and if they do contact you, it is typically beneficial to inform them that you have hired a bankruptcy lawyer and are in the process of going bankrupt. Don’t be surprised if they ask for the name and phone/fax number of your attorney to verify the information.

Sometimes original creditors feel that your account has gone too far without any payment and will choose to sell your account to another company to continue the collection process. These companies are known as third party creditors or collection agencies, and are a cause of stress before and during the personal bankruptcy process. In fact, some have said that the incessant calls from collection agencies are what finally made them decide to go bankrupt. The good news is that you, as a debtor, have certain rights that protect you from third party creditor harassment. The “Fair Debt Collection Practices Act” or FDCPA is a United States statute that was created to prevent abusive collection attempts. The FDCPA states that as soon as your hire an attorney in the pursuit of filing personal bankruptcy, collection agencies lose the right to contact you. If they continue to do so contact your bankruptcy attorney immediately to see if possible sanctions can be filed against them for violating your rights.

If you are currently experiencing multiple creditor phone calls a day, be sure to note who is calling and whether they are an original creditor or a collection agency; No matter which type of creditor it is, going bankrupt can help. Once you have found the best bankruptcy lawyer for your case be sure to tell them about the calls you are receiving so they can evaluate whether or not your FDCPA rights are being violated. Remember, you have rights as a debtor and you should never feel bullied by your creditors.

Idaho State Bankruptcy Laws

What are the Idaho Bankruptcy Exemptions?

IdahoIdaho law protects all or a portion of your property from being seized by creditors or the bankruptcy trustee in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you are generally allowed to keep all of your assets and property. Certain exceptions may apply, so it’s wise to consult with a Idaho bankruptcy attorney to find which of your assets will be protected in a bankruptcy filed in Idaho. In general, the major Idaho bankruptcy exemptions include:

GENERAL IDAHO EXEMPTIONS
Real Estate (the Homestead Exemption)
A dwelling house or mobile home, and the lands on which said structures are situated, with a total exemption not to exceed the lesser of: (i) the total net value of the lands, mobile home, and improvements thereon, or (ii) the sum of $50,000.
Automobiles
Up to $3,000 of equity in one motor vehicle can be protected.
Other Property
$1,000 for jewelry; $1,500 for implements, professional books, and tools of the trade; and $500 per item (not to exceed $5,000 in the aggregate) for the following items: household furnishings, goods, and appliances held primarily for the personal, family, or household use of the individual or a dependent of the individual; wearing apparel, animals, books, and musical instruments; and family portraits and heirlooms of particular sentimental value to the individual.
Go to the complete list of Idaho bankruptcy exemptions

Please remember that this page provides general information only, and is not intended to provide legal advice. The information is not a substitute for the advice of a qualified bankruptcy attorney. If you need legal assistance, consult an attorney.

Which state’s exemption laws apply in your bankruptcy?

IdahoGenerally, the laws of the state in which you lived for the 730 days (2 years) prior to filing a bankruptcy petition will apply in your bankruptcy.

If you have not lived in the same state for the 2 years immediately prior to filing your bankruptcy petition, the laws of the state in which you lived for the majority of the 180-day period preceding the 2-year period will likely apply.

If application of the preceding general rules renders you ineligible for exemptions under any state’s laws, you may be allowed to choose the federal exemptions applicable in your bankruptcy.

Is Idaho a community property state?

Yes, Idaho is a community property state. Because it is a community property state, you are responsible for any debts that your spouse incurred while you were married. You are therefore equally liable for your spouse’s debts even if you did not voluntarily assume liability for them by, for example, cosigning for a loan given to your spouse.

How did your senator vote on the new bankruptcy laws?

Following years of intense lobbying by creditors, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). How did your Senators vote on these largely pro-creditor provisions?

Craig (R-ID) — YEA
Crapo (R-ID) — YEA

Idaho Bankruptcy Court Locations:

US Courts – District of Idaho
550 W. Fort St., Rm 400
Boise, ID 83724
(208) 334-1074

Pocatello Office
801 E Sherman St, Rm 119
Pocatello, ID 83201
(208)478-4123

Moscow Office
220 E 5th St, Rm 304
Moscow, ID 83843
(208) 882-7612

Coeur d’Alene Office
205 N 4th, Rm 202
Coeur d’Alene, ID 83814
(208) 664-4925

Note: You may not have to actually go to one of the above bankruptcy courts. Trustees often conduct your meeting at a local venue.

Although bankruptcy is federal law, the bankruptcy courts in each jurisdiction have local rules that must be followed. A local bankruptcy attorney will be familiar with the specific rules in your area.

Idaho Bankruptcy Attorney Locations:

Looking for an Idaho bankruptcy attorney?
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Gambling and Bankruptcy

Everyone’s finances are different, and for that reason everyone’s financial struggles are different. Thousands of people each year choose bankruptcy help to assist them with whatever type of financial difficulty they are having. There are different rules within the bankruptcy code for specific types of debt whether it be a secured debt like a mortgage or a vehicle, or unsecured debt like credit cards and medical bills. One type of debt that has more recently come onto the bankruptcy scene is gambling debt, and it must be handled with care.

According to the current Bankruptcy Code, dischargeable debt is debt that is eligible to be eliminated by filing bankruptcy, while non-dischargeable debt cannot. Some types of non-dischargeable debt are: student loans, child support, alimony, back taxes, and for many years gambling debt. Times changed, of course, and suddenly fewer gamblers were using cash, and instead they were able to gamble with their credit cards. This lead to quite a change for how gambling debt was handed within Chapter 7 and Chapter 13 bankruptcy cases.

Because credit cards fall under the category of unsecured debt they are typically dischargeable whether you are filing chapter 7 or filing chapter 13 bankruptcy. The “judge” that presides over bankruptcy cases is known as the trustee and they ultimately can choose which debts, if any, to object to. That is where the subject of gambling debt within bankruptcy becomes very messy. Whether you find a cheap bankruptcy lawyer or file bankruptcy yourself you will be required to disclose all of your financial information including gambling debt for the past couple of years.

Section 523(a)(2)(A) of the Bankruptcy Code provides an exception to discharge for debts obtained by “false pretenses, a false representation, or actual fraud. In plain English this means that Creditors owed gambling debts may file what are known as “adversary proceedings” to challenge the dischargeability of their debts. These cases are rare and extremely hard to win, but they do occur. In most cases they take place after the mandatory “Meeting of Creditors” and may require the debtor to pay additional attorney’s fees since the adversary proceeding is technically an extra civil suit.

In most cases if a trustee finds out about debt that was purposefully left off the bankruptcy paperwork or purposefully not mentioned in the bankruptcy hearing it he/she may suspect fraud in your case and it could affect the dischargeability of other debts you have. If gambling debt is the bulk of your financial struggles then you should be upfront with your bankruptcy attorney so that they can work to ensure that the trustee agrees that the debt should be dischargeable. Remember that filing bankruptcy is a way to get your finances on track and give you a fresh start so every little bit helps. In most cases even if the bankruptcy trustee decides to not erase your gambling debt they will still allow all other types of unsecured debt to be erased.

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