If you are in over your head with debt, as the banks want you to be, you may be able to get help in bankruptcy.

The United States Bankruptcy Code is designed to give good faith debtors a fresh start.

Granted, you would never want to enter into a repayment plan under Chapter Eleven or Chapter Thirteen, which would allow you to keep a house you owned, possibly underwater, by putting yourself under austerity measures, lasting for years, that you would probably not be able to satisfy.

But you may be able to use Chapter Seven, which provides for liquidation of your assets, allowing you to walk away from credit card debt, but not student loan debt, while you may keep roughly eleven thousand dollars worth of stuff.

This will cost approximately two thousand dollars to pay a personal bankruptcy attorney in advance, so, if you pass an income test, you can file “straight no assets” meaning that there is an imaginary sale, you get to keep up to eleven thousand dollars of stuff, and a lot of your debt will be discharged—i.e. cancelled forever.

As soon as you file, the automatic stay will come into effect, so your creditors may not contact you, or take action against you, in any way—except, of course, to dispute the amount of the debt you owe to them, if you are not honest, as they address the bankruptcy court.

I am not giving legal advice, but a lawyer who specializes in personal bankruptcy should be able to give you a free consultation, so you can see if Chapter Seven, Straight No Assets, or even just a plain liquidation, would work for you.

It is very important that you do not lie to your lawyer, the trustee, or the judge, and that you play absolutely straight, or you will be in very hot water.

It is also very important not to engage in fraudulent transfers or conveyances, so you must not try to hide assets by giving them to your friends to hold through phony sales.

The laws are to help good faith debtors, who got in over their heads, to get a fresh start—not for people to play games.


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