Bankruptcy FAQ
What is a Bankruptcy?
Bankruptcy is a debt remedy that is governed almost
exclusively by federal law. Bankruptcy is largely a remedy sought by debtors, to
protect themselves from collection.
What is a Debtor?
A Debtor is a natural or legal person who owes money or another obligation to
someone else. For example, a person who borrows money from a bank is a debtor.
What type of bankruptcy is right for me?
Click here to see what kind of bankruptcy is right for you.
What is a Creditor?
A creditor is a natural or legal person to whom a debt is owed, in the example of
a debtor being the person who borrows money from a bank, the bank is the
creditor of the person who has borrowed money. The creditor gives something of
value to the debtor and the debtor agrees to repay the creditor according to
their agreement.
Generally, the debtor and the creditor voluntarily enter into
the transaction creating their respective obligations surrounding the debt.
However, some debtor and creditor relationships are created by law. For example,
a debtor-creditor relationship is created if a person is the losing defendant in
a personal injury action, or a person fails to pay taxes.
What is a Discharge of Debts?
One of the reasons people file bankruptcy is to get a “discharge”. A
discharge is a court order which states that you do not have to pay most of your
debts. Some debts cannot be discharged. For example, you cannot discharge debts
for: child support; most taxes; alimony; most student loans; court fines and
criminal restitution and personal injury caused by driving drunk or under the
influence of drugs.
The discharge only applies to debts that arose before the
date you filed. Also, if the Judge finds that you received money or property by
fraud, that debt will not be discharged.
What are Non-dischargeable Debts?
The Bankruptcy code recognizes that, for public policy reasons, certain debts should
not be capable of being discharged in bankruptcy. Examples of non-dischargeable
debts include spousal and child support, student loans, in the absence of “undue
hardship”, and certain taxes and penalties.