Bankruptcy is FEDERAL LAW that protects debtors and their property from creditors and provides debtors some much needed 'breathing room' and a 'financial fresh start'- a second chance.

The American economy is based on consumer debt. We are constantly being urged to 'buy-buy-buy'. The 1980's & 1990's were decades of readily available credit and seductive pressures urging us to 'buy' goods and services at an unparalleled rate. Many Americans have been 'led' into an almost bottomless pit of insurmountable debt overload.

Others suddenly face the reality that due to no fault of their own, they've been the victim of the dramatic 'downsizing' of their wallet. For whatever the reason, countless Americans face the daily reality that their debts far exceed their income and there's no help on the horizon. It's little wonder that economists predict the number of consumers filing bankruptcy to continue to climb each year for at least the next decade.

Individual Consumers are not the only ones who have fallen victim to the lure of credit. We live in an age where the very financial institutions granting consumers credit required $500 billion tax-payer dollar bailouts to save them from themselves. Even governing bodies, Orange County California, among them, have been forced to file for the protection of federal bankruptcy.

The average credit card balance is in excess of $2,500, with most households having at least three cards. The typical cardholder, in 1994, used about 10 different cards for gas, groceries, retail and other credit items, including catalog orders and has an average credit card debt of $25,000.

Dischargeable Debts

Credit Cards

Tax Relief

Student Loans

Home Loans

Most economists use as a 'rule of thumb', a ratio of unsecured debt to annual income of 40-50% percent , as being a strong indicator that bankruptcy and 'starting over' may be the best option available to consumers.

The overwhelming majority, approximately 90% (percent) of all bankruptcies filed in the United States are Chapter 7, commonly referred to as 'Straight Bankruptcy'. Most consumer debt is "unsecured"and subject to discharge in a chapter 7 straight bankruptcy. Simply meaning that it is not guaranteed by property as collateral that can be seized or repossessed if the debt is not paid. Credit card and medical debts are among the most common unsecured debts.

Who Can File Chapter 7?

Any individual who lives, has property in, or a place of business in the United States may file a chapter 7 Bankruptcy. You don't have to be insolvent, or even behind on your bills.

In a Chapter 7, your unsecured dischargeable debts will be canceled - wiped out - letting you truly 'start over' free from your past debts! The overwhelming majoity of consumer debt is unsecured; including credit cards, medical bills, personal loans, department store charges, taxes etc.. Any debt that is not "secured" by collateral that can be repossessed if you fail to pay the debt is - an unsecured debt, and can be wiped out in chapter 7.

Dischargeable Debts

Credit Cards

Secured debts are all debts that are secured by collateral. The most common are mortgages and auto loans. Secured debts are not dischargeable in bankruptcy. That doesn't mean that you loose your home or vehicles. It simply means that you must either continue to pay for them; or surrender them to the lien holder.

Exempt Property

Although in a chapter 7, any property not protected by federal or state exemptions must be 'given up' to be sold and the proceeds paid to your creditors; very few debtors actually ever 'loose' any of their property. Liberal state and federal exemptions 'protect' all, or most, of the average debtor's interest in his/her property - their "equity interest". Much of the average debtor's property is already burdened with liens for all, or more than it is worth, leaving nothing available to creditors.

 It is not unusual for a debtor's home to burdened with a mortgage, a home equity loan, and a home improvement loan that are more than the property's value. (See Home Loans)

Because cars depreciate at a rate usually faster than their payoff; the payoff on a car or truck is often as much or more than the vehicle is worth in the market place, and the debtor has no 'equity' interest to exempt. (See State By State Exemptions)

For example , if your car is worth $6,000 and you still owe $4,000 to the lien holder, you have an equity interest in your car of $2,000. Under the federal bankruptcy exemptions, a motor vehicle is exempt up to $2,400 ($4,800 for spouses). Your entire equity interest of $2,000 would be protected, with $400 left over. You would not have to give up your car if you file bankruptcy.

Dischargeable Debts

Credit Cards

Tax Relief

Student Loans

Home Loans

 To determine whether or not your property is exempt, you must first determine how much your property is worth - its value. A car's value is determined by using the same method a car dealer uses - the 'Blue Book' value. (See State By State Exemptions)

 Homes or 'homesteads' are generally granted greater protection because of the value placed on home ownership in America. Homes and other 'real property' are generally valued based on their taxable value used to determine your property taxes, or the local market. The Federal Exemption for homesteads is $15,000 and $30,000 for spouses. Like all other property the exemption applies only your equity interest . Texas and Florida exempt homesteads regardless of the debtor's interest in their home. (See Home Loans  for additional information)

 Personal property, such as household furnishings, appliances, clothing, and just about everything else you own, is valued by its real world or garage sale value, not what you paid for it or even what you may still owe and is protected under the state or federal exemptions. (See State By State Exemptions)

Dischargeable Debts

Credit Cards

Tax Relief

Student Loans

Home Loans

Some states allow you to choose between using the federal exemptions or your state's exemptions. Others give you no choice and require you to use only your state's exemptions. (SeeState By State Exemptions)

Citizens of the following 17 states may choose either the following federal exemptions or their state's exemptions:

**Remember - exemptions apply only your 'equity interest' and you may Double the amount of the following federal exemptions for a married couple (11 U.S.C. Section 522) (See State By State Exemptions)