You are here

Bankruptcy

Bankruptcy is a way federal court helps businesses and people deal with debt.  If you declare bankruptcy, you may be able to get rid of your debt and start over.

Bankruptcy is not for everyone. If you are collection proof, you may not need to file for bankruptcy.

You may have better options. Talk to a debt counselor. Talk with an attorney if you think bankruptcy is the answer.

Bankruptcy is not all good. It hurts your credit. And some employers may not want to hire you.

Regular people file Chapter 7 or Chapter 13 Bankruptcy. Businesses can choose from other kinds of Bankruptcy also.

Filing for bankruptcy - the good and the bad

The good side of bankruptcy

The bad side of bankruptcy

  • You can start over with no debt.
  • No more calls and letters from debt collectors.
  • Protect your home from creditors.1
  • Chapter 13 bankruptcy may help you avoid foreclosure and repossession if can make up your missed payments.
  • Hurts your credit score.
  • Hard to get new loans or credit with good terms.
  • Even though it is illegal, employers and landlords may not hire or rent to you.

Endnotes

1 Once the court has made a judgment, the creditor can ask for an ‘execution.’ An execution is the paper a creditor can use to take your car and sell it to pay the debt.

The creditor can use the execution to take money from your bank account. This is called “garnishing”.

The execution also means the creditor can put a lien on your home. A lien is a right to the cash value of your home.

When your home is sold, you must pay the people who have put a lien on your home before you can pay yourself. A lien holder can foreclose on your home and sell it to get the judgment amount.

If you have a homestead, the lien holder cannot force the sale of your home.

Produced by Mariah Jennings-Rampsi, South Coastal Counties Legal Services
Created March 2015

Get legal help

  • You may be able to get help from your local legal services program. Fill out the Bankruptcy Eligibility Questionnaire on Volunteer Lawyers Project’s Bankruptcy Program (VLP) website.

Filing without a lawyer

  • Bankruptcy is complicated. Filing without a lawyer is risky.
  • You can lose property and money. You can go to jail if you do not tell the truth.

Ask a Law Librarian

If it's
Monday-Friday
between
9am and 4pm