FREE BANKRUPTCY CLASS
If you're considering bankruptcy, you should attend the free bankruptcy class offered as a community service by Legal Aid Center and UNLV William S. Boyd School of Law. The bankruptcy class will teach you the realities and myths of bankruptcy, the differences between Chapter 7 and Chapter 13 bankruptcies, how to represent yourself in court, and alternatives to bankruptcy. For class schedules and materials, click to visit our Bankruptcy Class page.
The U.S. Courts have created a series of Bankruptcy Basics videos, which provide a good overview of the bankruptcy process. Legal Aid Center has prepared videos that supplement the courts' videos with additional and Nevada-specific information.* To watch the videos, click to visit our Bankruptcy Videos page.
*Legal Aid Center's videos were made possible thanks to a grant from the American College of Bankruptcy and the American College of Bankruptcy Foundation.
WHAT IS BANKRUPTCY?
Bankruptcy is the legal process that gives a debtor acting in good faith a “fresh start” by eliminating most of the debtor’s debts, and repays creditors in an orderly manner to the extent the debtor has available property.
WHAT IS THE EFFECT OF FILING BANKRUPTCY?
The filing of a bankruptcy petition triggers an “automatic stay” that prevents creditors from collecting debts. Most creditors cannot take any action during the course of an open bankruptcy without permission of the court. Notably, filing bankruptcy will:
- Stop bill collectors from calling.
- Stop wages from being garnished.
- Stop most pending civil court proceedings.
- Temporarily stop foreclosures and possibly delay evictions.
Once a bankruptcy is successfully completed, most of a person’s debt is permanently erased (“discharged”). This means creditors cannot collect on the discharged debt.
WHAT IS CHAPTER 7 BANKRUPTCY?
A Chapter 7 bankruptcy is often referred to as a “liquidation” bankruptcy. This type of bankruptcy cancels most ordinary consumer debt and allows the debtor to keep certain “exempt” property. However, you may have to surrender some property. A bankruptcy trustee may collect and sell your nonexempt money and assets, and then use the proceeds to pay your creditors. Any remaining balances owed to those creditors are discharged.
WHY WOULD ONE FILE CHAPTER 7?
People who file Chapter 7 are usually low-income earners with few assets to protect. Chapter 7 is designed primarily to help eliminate overwhelming debt. Chapter 7 will not permanently stop a pending foreclosure or car repossession. To keep a car or house in Chapter 7, you must be able to keep making the regular payment. Chapter 7 can be helpful for car owners who want to stop paying a car loan and surrender the car. It also helps homeowners by eliminating the balance due on their mortgages after foreclosure.
WHAT IS CHAPTER 13 BANKRUPTCY?
A Chapter 13 bankruptcy provides a “reorganization” of debts by allowing the debtor to either partially or fully repay debts through a three- to five-year repayment plan. Chapter 13 allows you to keep some or all of your property. In exchange, you must pay the trustee all of your monthly disposable income for three to five years, and the trustee in turn pays your creditors. Upon successful completion of a Chapter 13, your remaining dischargeable debts are eliminated. The total of payments over the three to five years must be enough to pay at least the full amount of all mortgage arrears, back taxes, payments for retained secured items, child support and spousal support arrears, and a trustee fee.
WHY WOULD ONE FILE CHAPTER 13?
People who typically file Chapter 13 are:
- Regular income earners
- Homeowners trying to save a house and who can pay mortgage arrears in full in three to five years.
- Homeowners with no equity seeking to eliminate a second mortgage.
WHAT DEBTS ARE ELIMINATED IN BANKRUPTCY?
Bankruptcy erases many debts, such as:
- Credit card balances
- Medical bills
- Payday loans
- Personal loans
- Mortgages (But you must keep paying if you want to keep the house.)
- Car loans (But you must keep paying if you want to keep the car.)
- Most court judgments
WHAT DEBTS ARE NOT ELIMINATED IN BANKRUPTCY?
There are several federally protected debts that are usually not eliminated through a bankruptcy, including:
- Child support
- Spousal support
- Most IRS taxes
- Student loans
- Court-ordered restitution
- Court judgments for injury or death as a result of a DUI
- Debts incurred fraudulently
I FILED BANKRUPTCY BEFORE. HOW LONG MUST I WAIT TO FILE AGAIN?
Federal law limits how frequently a person can file for bankruptcy. If you previously filed a Chapter 7 and received a discharge, you will have to wait:
- Eight years to file another Chapter 7
- Four years to file a Chapter 13
If you previously filed a Chapter 13 and received a
discharge, you will have to wait:
- Generally six years to file a Chapter 7
- Two years to file another Chapter 13
If your case was dismissed in the past 180 days, you may have to wait to file again until 180 days after the dismissal. Repeat filers could face limitations on the duration of the automatic stay: if you filed a bankruptcy case within the last year that was dismissed, the automatic stay lasts only for 30 days in your next case; if you filed two or more bankruptcy cases within the last year that were dismissed, there is no automatic stay for subsequent cases. You would have to file a motion asking the court to impose the automatic stay.
For additional resources, click to visit our Bankruptcy Links page.