United States Bankruptcy laws are designed to provide relief to individuals and businesses that are experiencing extreme financial difficulties. Information on Chapters 12 and 13 of the Bankruptcy Code is also available.
Chapter 7 refers to straight or liquidated bankruptcy. Under Chapter 7, a debtor (or husband and wife debtors) files a petition for relief, which automatically entitles the debtor to a court order protecting the debtor from the people or businesses to whom he owes money, who are called "creditors." With the petition the debtor must list all property and all debts. Once the petition is filed, a trustee is appointed to supervise the bankruptcy, and the debtor can no longer control his property until the case is closed or the property is released by the court. The trustee has the right to ask any questions about the debtor's property and debts. The trustee can sell, mortgage, rent or dispose of the debtor's property. The debtor may be able to keep some of his property.
The debtor must come to a meeting where the trustee and creditors can ask questions of the debtor. Most bankruptcy cases can be finished within three months or so, but some can last for years if the debtor has a great deal of property.
At the end of a case the debtor will ordinarily receive a discharge order. This order formally discharges or erases many debts, except certain types of debts such as alimony, support, recent taxes, student loans or debts obtained by fraud and some others.If a debt is discharged, the debtor will not be required to pay it, although it can be repaid voluntarily. A discharge does not ordinarily affect mortgages on real estate or car loans and some other liens. Often court judgments and certain other liens can be erased.
Filing for bankruptcy relief damages credit ratings; it can be reported by credit bureaus for ten years. Although credit may be difficult to obtain after bankruptcy, there is no law prohibiting a person who files bankruptcy from obtaining credit.
While individuals may represent themselves bankruptcy can be complicated. There are exceptions to much of what is set forth here. Anyone considering bankruptcy is urged to consult a lawyer.
This information was prepared to give you some general information on the law. It is not intended as legal advice about any particular problem. If you have questions about the law you should consult a lawyer. If you do not know a lawyer, you can call the South Carolina Bar Lawyer Referral Service weekdays between 9 a.m. and 5 p.m. The number is 799-7100 in Richland or Lexington Counties, and 1-800-868-2284 from other parts of the state.