Are You Buried With Debts?

By: Dennis E. Chua, Esq.

Even with the recent announcement by some economists that the US recession has ended, a lot of people still don't feel that the recession is really over. This is because we still hear news of companies continuing to lay off its employees; the unemployed having difficulty to get back to work; credit card holders struggling to pay off their debts; and homeowners losing their homes to foreclosure.

To add to the stress of one's economic difficulties, it is compounded by the continuous phone calls of creditors and their collection agencies made not only at the debtors' home but also at their place of work. To get out of this financial mess that they are in, many have opted to file for bankruptcy so that they could get rid of their debts.

For individual debtors who would like to file for bankruptcy, they can choose between filing a bankruptcy petition under Chapter 7 or Chapter 13.

In filing for Chapter 7 bankruptcy, the debtor is seeking to liquidate all his debts. The filing of the Chapter 7 petition operates in the total discharge of all debts of the debtor. However, there are some debts which are not dischargeable such as taxes and student loans. Once a Chapter 7 petition is filed, the debtor loses control of his assets and all non-exempt assets should be turned over to the bankruptcy court through the bankruptcy trustee. The bankruptcy court will then sell the debtor's non-exempt property to pay off existing creditors.

As for a Chapter 13 bankruptcy filing, the debtors seek to reorganize his financial situation by submitting a payment plan to the bankruptcy court to pay off certain creditors. Unlike a bankruptcy petition under Chapter 7, the debtor retains control and possession of all his assets while the proceedings are pending. A debtor may choose to file under Chapter 13 if he has in his possession non-exempt assets (of value or equity) which are not secured by any debt.

Whatever type of bankruptcy petition a debtor may eventually choose, his filing would help him get back on track by giving him a fresh start - a life free of debts. Filing bankruptcy may thus be a way out for someone who is now buried in debts.

Atty. Dennis E. Chua is a partner in The Law Firm of Chua Tinsay and Vega (CTV) - a full service law firm with offices in San Francisco, San Diego and Manila. The information presented in this article is for general information only and is not, nor intended to be, formal legal advice nor the formation of an attorney-client relationship. The CTV attorneys will be holding regular free legal clinics at the Max's Restaurant in Vallejo, California. Call or e-mail CTV for an in-person or phone consultation to discuss your particular situation and/or how their services may be retained at (415) 495-8088; (619) 955-6277;
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