Bankruptcy: Salvation in a Financial Storm

Hardships, such as illnesses, layoffs and market declines can happen without warning. When they happen, your otherwise stable lifestyle can become like a sinking ship.

Your creditors, who used to be your safety nets and allies, become like thunder, lightning, waves and wind. They--with their collection calls and lawsuits--toss you around, heartlessly reminding you of your precarious condition.

Bankruptcy can be your salvation. It can help you abandon your sinking ship and safely make it to calmer waters. Or, it can enable you to fix your ship, and slowly make your way out of the storm.

Bankruptcy offers what's called the automatic stay. The automatic stay puts a stop to virtually all creditor collection activities. It stops the thunder, lightning, waves and wind. The automatic stay goes into effect the moment you file bankruptcy. Your home could be scheduled for foreclosure tomorrow morning, and the automatic stay would stop it. It's that powerful.

If you want to abandon ship, Chapter 7 bankruptcy may be the answer. Chapter 7 bankruptcy is sometimes called liquidation bankruptcy, because it involves allowing the bankruptcy trustee to liquidate, or sell, your nonexempt property and use the cash to pay your creditors. Nonexempt means unprotected. The law protects certain assets from the trustee, meaning you can keep them even if you file bankruptcy.

At the end of a Chapter 7 bankruptcy, your dischargeable debts are declared forgiven by law.

If you want to fix your sinking ship, Chapter 13 bankruptcy may be the answer. Chapter 13 allows you to keep all your property and get caught up on past due debt by paying your creditors through a court-approved payment plan. As long as you're making your payments, you can stay afloat financially, and eventually get back to financial safety.

Some people look down on bankruptcy as ifs it’s somehow immoral. However, for those whom bankruptcy laws were designed to help, bankruptcy is about survival, and there’s nothing immoral about that.

LEGAL DISCLAIMER: This blog’s content is not legal advice and does not create an attorney-client relationship. All information posted on this blog is intended to provide general information to the general public and not to any specific individual. If you require legal advice, please consult an attorney licensed to practice in your state. Ms. Seaborn is licensed to practice law in Georgia. You may contact her via e-mail at sdseaborn@attorneyseaborn.com.

Is bankruptcy an option for me if I'm behind on my child support payments?

Being behind on your child support will not prevent you from filing for bankruptcy; however, you should know that bankruptcy is not a means of avoiding child support. Bankruptcy law classifies child support, alimony, and other domestic support obligations as priority debts. Priority debts are the special class of financial responsibilities that lawmakers concluded were too important to let debtors walk away from. Domestic support obligations rank number one among other priority debts, such as certain types of judgments, taxes, and student loans.

While bankruptcy doesn't represent an escape from child support payments, it can represent a means of both getting out of debt and getting caught up on your child support arrearages (i.e. the amount you’re behind).

Chapter 13 bankruptcy allows you to put your child support arrearages into a three to five year payment plan. To qualify for Chapter 13, however, you must have regular income. You must also be able to show the bankruptcy court that you can maintain your regular monthly child support payments plus the Chapter 13 plan payment. Let's say, for example, you're now back to work after being unemployed for one year. If you didn’t make your $400 per month child support payment during the year you were out of work, then you owe approximately $4800 in arrearages. Depending upon the amount of other debts you include in your Chapter 13 plan, your Chapter 13 plan payment could be between approximately $80 and $134. In such a case, you would have to consistently pay your $400 monthly child support payment plus the $80 to $134 your Chapter 13 plan requires.

At the end of three to five years, you could potentially be debt free and completely caught up on your child support payments.

LEGAL DISCLAIMER: This blog’s content is not legal advice and does not create an attorney-client relationship. All information posted on this blog is intended to provide general information to the general public and not to any specific individual. If you require legal advice, please consult an attorney licensed to practice in your state. Ms. Seaborn is licensed to practice law in Georgia. You may contact her via e-mail at sdseaborn@attorneyseaborn.com.