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Personal bankruptcy: what consequences can be expected?

by Wilfred Shah
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Anyone who goes into personal bankruptcy does so with the prospect of getting rid of all their debts. This comes with some restrictions that result from the bankruptcy process.

Until the final discharge of residual debts, debtors usually have to forego six years of being able to dispose of their financial life completely independently during bankruptcy. Only when they have successfully passed the conduct of business phase by always adhering to the rules can they dare to start over financially. More information on the same can be found in chapter 7 bankruptcy here: https://attorneydebtfighters.com/chapter-7-bankruptcy-lawyer-tampa-fl/.

The following will address the question of the consequences of personal bankruptcy. What do I have to prepare for as a debtor in bankruptcy? How much money do I have with a personal bankruptcy? Find out more in this article.

Important note: If you apply for personal bankruptcy from October 1st, 2020, you will probably already benefit from the discharge of residual debt after three years. The debtor no longer has to pay the procedural costs and 35 percent of his debts. It is sufficient if he behaves honestly and fulfills his obligations. You can find more detailed information on this planned change in the law, with which US law will be implemented, in our guide on the discharge of residual debt.

Personal bankruptcy and its consequences in brief

What are the consequences if I file for personal bankruptcy?

During personal bankruptcy, the debtor can no longer dispose of his assets: the insolvency administrator takes them into his possession and his administration. In addition, the debtor must cede the portion of his income that is free of attachment to the administrator for a maximum of six years of conduct until the remaining debt is discharged.

What consequences do I have to expect?

During personal bankruptcy, the debtor must meet certain obligations and B. pursue or seek appropriate work.

Does personal bankruptcy also have positive consequences for me?

Yes. If the debtor adheres to these rules, the court grants discharge of residual debt at the end of the proceedings.

The immediate consequences of personal bankruptcy

Anyone who goes into personal bankruptcy will directly feel the consequences and effects of the bankruptcy proceedings. With the opening of bankruptcy, the liquidator takes possession of the debtor’s entire assets. This can no longer dispose of it.

Task of the liquidator is to make all recoverable assets located and into the bankruptcy estate take. From this the creditors are finally satisfied. For this purpose, the insolvency administrator distributes these available assets proportionally among them.

Personal bankruptcy: what do I have during the proceedings?

In addition, the insolvent debtor must surrender part of his income for the duration of the so-called assignment period, i.e., until the end of the conduct phase. How much exactly depends on the garnishment table. Because so that the debtor can still maintain a subsistence level despite the ongoing insolvency proceedings, he is entitled to a seizure-free amount, which he can freely dispose of in any case.

According to the currently applicable garnishment table from July 2017, debtors are allowed to keep at least $1,139.99 of their income. The amount increases with the number of people for whom there is a maintenance obligation.

In addition, not the entire amount in excess of this deductible is given to the trustee. Depending on the level of income, a certain increasing share must be paid.

Obligations during personal bankruptcy

When personal bankruptcy is opened, there are also obligations that are not of a direct financial nature. The debtor must always inform the trustee about changes in his circumstances, for example if he changes his place of work or place of residence. Changes that affect his income, for example if he inherits, must also be reported.

In addition, one of the consequences of personal bankruptcy is that the debtor is subject to an obligation to work during the conduct of business phase, i.e., he must pursue or seek employment.

However, personal bankruptcy can have other consequences. A negative Scheme entry may mean that the debtor no longer receives any loans. Renting a new apartment can also lead to difficulties because of the Scheme. Anyone who commits a criminal offense during personal bankruptcy must expect criminal consequences.

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