Despite being one of the best legal options to get rid of accumulated debt, people refrain from filing for bankruptcy probably because they fear being judged. One of the major concerns people have is that their bankruptcy will be announced to their family and friends, which probably is shameful for them. While considering bankruptcy, and to quell any fear, it is important that people are aware of who will be aware of their bankruptcy filing. According to Dallas based law firm Recovery Law Group, there are two chapters under which individual debtors can file for bankruptcy – Chapter 7 and Chapter 13. Both bankruptcy chapters come with the automatic stay benefit and prevent creditors from taking any collection actions. However, there is a difference in the way your assets and debts are treated in both of them.
In the case of Chapter 7 bankruptcy, your assets are divided into the exempt and non-exempt property. There are two types of exemptions in bankruptcy, state and federal. Some states allow you to choose between federal and state bankruptcy exemptions, while others like California do not. However, provisions are made to protect different amounts of various properties like house, car, and household goods. In the majority of cases, nearly all property of a debtor comes under the exempted category, thereby offering protection. In case some property is not protected under the exemption, it is sold by the trustee to pay off creditors. Any dues which remain after selling off of non-exempt property are discharged at the end of the bankruptcy.
When an individual fails to qualify for Chapter 7, the other option available is Chapter 13. In this bankruptcy chapter, a repayment plan is devised keeping in account your earnings, your debt, and your assets, in order to repay your creditors. The repayment plan continues for 3-5 years duration after which any unsecured debts like credit card and medical bills or personal loans are discharged. Though Chapter 13 is slightly tougher, it is ideal for debtors with income above the mean state income.
Who knows of your bankruptcy?
In case you are facing a difficult financial situation and wish to weigh in your options you can call 888-297-6203 to consult with expert bankruptcy lawyers. Once you have reached the decision of filing for bankruptcy after discussing with your attorney and undergoing the mandatory credit counseling course, the case is filed at the United States Bankruptcy Court. Due to filing in a court of law, it becomes public record. However, finding the details of your case is like looking for a needle in a haystack. Unless the details are available, it is next to impossible to know about your bankruptcy. There are some people though, who are aware of your bankruptcy proceedings. These include:
- Your creditors are aware of your bankruptcy as you are expected to provide a list of your creditors to the court. This is because your creditors need to be aware of your impending bankruptcy and the automatic stay. In case you forget to add a creditor’s name, those debts won’t be discharged through bankruptcy. Apart from the creditors, the local bankruptcy trustee is aware of your bankruptcy. However, both court employees and the creditors are barred from reporting about your bankruptcy.
- Family and friends are generally unaware of your bankruptcy unless they have co-signed a loan which may result in them having some liability with you filing for bankruptcy. Unless they go digging around, they won’t be aware of your bankruptcy till you spill the beans, because the court prohibits court employees and creditors from disclosing such information.
- Employers are generally not notified of the bankruptcy filing and can only be aware if you inform them or they search through public records. Many people are worried that bankruptcy might hinder their chances of better employment but that is not so. However, bankruptcy shows on your credit report. Thus, if a prospective employer opts for a credit check before hiring he/she might become aware of your bankruptcy filing. One ray of hope for you is that employers cannot discriminate hiring prospective In some cases of Chapter 13, repayment to creditors might be deducted from your pay cheques due to which HR might become aware of your bankruptcy. Similarly, if wage garnishment is taking place then also your employer might become aware of your bankruptcy.
Bankruptcy has been devised as a mean to help people struggling with insurmountable debts to start afresh. It is no way meant to name and shame you. In case you are considering bankruptcy as a means of getting out of the financial mess, you need to consider an expert lawyer who can guide you through the entire way.