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Bankruptcy is when a court declares that a debt no longer exists or the court is asked to approve a plan to reorganize debts.

• Chapter 11 reorganizes a corporation or other business entity
  
• Chapter 13 reorganizes debts for individuals or married couples
  
• Chapter 7 wipes out debts

After major revisions in the law in 1978 and 1994, filing bankruptcy became a streamlined process where most consumer filers keep all their assets. Major changes effective 10/17/05 make it harder to get a discharge under Chapter 7, but an experienced attorney can guide their client through the process.

For individuals or married couples, Chapter 7 WIPES OUT unsecured debts like credit cards, signature, and medical bills forever. This is called "discharge." On secured debts like mortgages, vehicle loans, or furniture/jewelry store debts, the person simply keeps making payments if they want to keep that item. The asset or property they get to keep is called "exempt". The exemption laws in California are very liberal. For example, a member of a family unit can keep a home with $100,000 equity.

In Chapter 13, the person proposes a Plan to the court to pay debts over an extended period of time, usually 3 years, but 5 is often allowed. The debtor sends one payment in each month to a court trustee who in turn pays each creditor. While in a plan the person is protected by the court from collection calls or garnishment. On unsecured debts, no interest is paid, unlike bankcards where often more than half the monthly payment goes toward interest. Further, the court will not only excuse interest on the unsecured debt, but most of the time it will also discount the amount of the principal.

Anyone considering bankruptcy should see a qualified attorney. Most offer a free consultation. While there are people who advertise themselves as "paralegals" who will fill out the papers for a "discount fee", many have turned out to be rip-off artists disappearing with the client's money.

Attorney Joseph A. Weber has represented thousands of people and businesses in bankruptcy. He is a graduate of St. Leo University, the American College of Law, and has been a member of the Orange County Bar Association, The National Association of Chapter 13 Trustees, The National Association of Consumer Bankruptcy Attorneys, and the Orange County Bankruptcy Forum. He is the author of Credit Limits, a book about the proliferation of bankcards.

Joseph Weber is well-versed in the new bankruptcy law, having studied it for eight years as it was being formulated. He worked to actively oppose what he sees as a creditor-sponsored slap in the face to American consumers.