MonkeyPie - I am sorry that your parents are down on their financial luck, please know that they are not the only ones. I do work for a very well respected bankruptcy attorney in Ohio so I know a bit about the subject
Firstly - Please DO NOT GOOGLE bankruptcy. The internet is full of false information. Your best bet is an established bk attorney that practices in your state. Ok, now that that''s out of the way some basic info:
1. Most consumers file either a Chapter 7 or a Chapter 13.
In a Chapter 7 any assets are liquidated and the money is divided among the creditors that timely file a proof of claim with the court. A trustee is appointed and oversees this process, along with the judge. The vast majority of Chapter 7 cases that come through my office are "no asset" cases - meaning the debtors (our clients) don''t have anything of value - therefore, they lose nothing. In my district the court is not interested in your furniture, clothes, appliances, televisions/electronics or jewelry - unless any of these items are of *substantial value*. By law debtors are allowed to exempt a certain dollar amount of their personal property and the exemptions usually cover all of the things I listed before.
There are certain types of debt that are dischargeable and non-dischargeable. Credit cards, medical bills, unsecured personal loans, payday loans and signature loans are all dischargeable - meaning they do not have to be re-paid in a Chapter 7. Student loans issued by the U.S. Dept. of Edu., alimony, child support and most taxes are non-dischargeable - meaning that they must be repaid.
A Chapter 13 is esentially a bill repayment plan. All of the unsecured debt is consolidated and monthly payments are made to the bankruptcy trustee, who then distributes the money to creditors that file a timely proof of claim. The repayment term is generally 3 or 5 years (usually 5) and any debt that isn''t paid in the term is considered discharged by the court. Further, if a creditor fails to file a proof of claim the entire debt is considered discharged upon the closing of the case by the court.
2. Most consumers now have to complete a two-part consumer credit counseling/financial management course to file. Easy peasy - can usually be done online or over the phone.
3. Income must be under the median income. The median income is based on your family size for the city in which you live. For example, in Toledo, Ohio the median income for a single person is right around $40K. If your annualized income on the Means Test Form is more than that then you do not qualify for a Chapter 7. The median income raises with the number of people in your family. The median income numbers are established by the U.S. Trustees office and are reviewed several times a year.
There is so much information involved in filing a bankrutpcy case and every case is different. Most people who file for bk start out with bad credit scores so they usually go UP after filing just because the debt load is removed. The immediate effect of filing is not good. May be able to qualify for credit through an account issued through HSBC/$300CL/25%+ interest. No chance of getting a car loan for probably a year and absolutely no chance at getting a mortgage for at least 2 years. After the two year mark lenders could really care less about a bankrutpcy if you''ve worked to improve your credit.
I know this is really long - I wasn''t sure exactly what you''re looking for. I''m glad to help if you have any more specific questions.
