Introduction to Bankruptcy (Video & Transcript)

Introduction to Bankruptcy

(4 minutes, 45 seconds)

[Jennifer G. Hayden, Esq., Molleur Law Office]

My name is Jennifer Hayden. I am one of the bankruptcy attorneys at Molleur Law Office. Looking up bankruptcy information on the Internet can really be very overwhelming. Bankruptcy is a very unique process. Speaking with a qualified bankruptcy professional is something that you really need to do before you believe everything that you read on the Internet.

Bankruptcy Chapters

There are four major chapters that my firm basically deals with: I'll start at the bottom.

  • Chapter 7, which is a liquidation bankruptcy. It's a very common consumer bankruptcy for people to file
  • Then there's Chapter 13, which is sometimes nicknamed a "wage earner" bankruptcy. That's a longer bankruptcy. It can take up to 60 months which can be a fair time.
  • Another type of bankruptcy chapter that we actually see a little bit of here in Maine is Chapter 12, for family fishermen and farmers. It's a specific unique bankruptcy designed to address the various issues that farmers and fishermen face.
  • And then of course there's Chapter 11, and we all hear about Chapter 11 on the news. Chapter 11 is generally for big businesses, but individuals sometimes have to file Chapter 11 as well.

Whichever chapter you have to be in, a bankruptcy professional really needs to sit down and look at your unique situation.

Before you file bankruptcy, you take a course called "Credit Counseling". It's very easy to do. You can take it online or you can take it over the phone. You don't have to go anywhere to take it. It generally takes about an hour. Many people find the course very helpful because it overviews their financial situation, it can answer questions about what their debt-to-income ratio is, and it can really lay out the financial issues that they are facing.

Bankruptcy Myths

Bankruptcy Exemption

I get a lot of questions about whether people will lose everything that they own when they file bankruptcy, and that's just a myth. So what the state of Maine has done, as well as many other states, is it's created what's called a "bankruptcy exemption scheme". What that scheme does is it allows people to protect various types of personal and real property when they file bankruptcy. Things like your pots and pans and your clothing and your books and the photographs you took of your family, those types of things are what are protected. There are other types of things that don't have an exemption. So when planning for a bankruptcy, a bankruptcy professional will look at the assets that you do have and talk to you about the best way to protect them, whether it's filing one bankruptcy case or another.

Job Loss Due to Bankruptcy

Yet another myth in bankruptcy is that you'll lose your job when you file for bankruptcy. There's actually a provision in the bankruptcy code that talks about the illegality of discriminating against people who have filed bankruptcy. In my experience I've never seen someone lose their job because they filed a bankruptcy case.

Effect of Bankruptcy on Credit Score

If you're seeking counsel about bankruptcy, it's probably possible that your credit is already suffering. When you file a bankruptcy case, it's very likely that your credit score will take yet another plummet. But upon the filing of your case, your creditors are not allowed to say anything more negative about you to the credit bureaus. Your credit score will be hurt by the filing of bankruptcy. But what you should know is that the bankruptcy notation will stay on your credit report or can stay on your credit report for up to ten years. After that, by federal law, it has to be removed.

Desire to Repay

There are a lot of bankruptcy myths, but I think that the #1 myth is that people who file bankruptcy don't want to repay their creditors. They're people who just went out the mall and maxed out their credit cards, bought all this stuff, and now they don't want to repay. That is just a myth. The clients that I see on a regular basis have had life happen to them—one, two, three times over. Someone has passed away, someone's been injured, a child becomes sick, job loss, a move—any number of things can influence someone's financial situation quite dramatically. Of course you want to repay your debts, and you've been paying them, and you've been trying to pay all along, it's just become impossible. What happens for people is they begin to have to make choices about paying credit card debt or paying their mortgage or their rent or putting food on the table for their family. That's when you really need to seek professional advice about your finances.

[The intent of this video is for educational purposed only.]

[It is not legal advice.]

[If you are in need of legal advice, you should seek advice from a qualified bankruptcy or foreclosure defense attorney licensed to practice in the state in which you reside.]

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