Dudugjian & Maxey

A Law Corporation

Telephone (916) 786-7272 Facsimile (916) 786-7306


What Can I Do If I Can't Pay My Debts?


If merchants in medieval Venice failed to pay their debts, creditors closed their operation by breaking the bench from which they did all their business. Italian for "broken bench," banca rotta, is the word from which bankrupt is derived (Cifelli, 1983). While the bankrupt party in medieval Venice saw their place of business go from commerce to kindling in moments, the situation in the United States today is different.

What can Bankruptcy do for Me?

Bankruptcy is a way to obtain a "fresh start" when you owe more money than you can be expected to pay in the near future. The law allows an honest debtor to have a court "discharge" or cancel most of his or her debts in order to make that fresh start. This form of bankruptcy is known as a "Chapter 7" and is sometimes called "straight" bankruptcy.

You can use bankruptcy to discharge your debts no matter how you got into debt, as long as you were honest.

Bankruptcy usually means that most, and sometimes all, of your debts will be canceled.

Going through bankruptcy generally stops your creditors from "garnishing" or taking your wages. When you file a petition in bankruptcy, the law says your creditors are not allowed to garnish your wages, sue you or bother you with letters or telephone calls asking for payment.

As soon as the proper bankruptcy forms are filed in court, you can stop making payments on your old bills, except for alimony and child support. Note: This does not apply to most secured debts you may have, unless you give up the property securing the debt.

How does a bankruptcy get started?

To begin with, the correct type of bankruptcy for you needs to be determined. Then the correct bankruptcy forms need to be filed with the appropriate U.S. Bankruptcy Court.

The bankruptcy court requires a lot of information. You must reveal your income, bank accounts, tax returns, real estate, personal property and much more. If you make mistakes, some or all of your debts might not be canceled.

How long does it take to go through bankruptcy?

Generally, it takes four months from the time your forms are filed with the bankruptcy court until your debts are discharged. However, if any creditor objects to having a debt canceled, it may take longer. Even though it takes time to complete the actual bankruptcy, you can stop paying your creditors as soon as your initial documents are filed with the court.

Approximately 30 days after your bankruptcy papers are filed, a "meeting of creditors" is held. Creditors do not have to attend because they are represented by the trustee. But you must attend and testify under oath. Your attorney will assist you by telling you what papers to bring with you, and by attending the creditors meeting with you.

Once the judge has decided any disputes (if applicable) between you and your creditors, your debts will be discharged usually within 90 days.

What if I just need more time to pay my debts?

An alternative bankruptcy, called a Chapter 13 plan, lets you pay off part or all of your debts over a period of time under court supervision. You can usually take up to three years to pay; but in some cases, the court gives you as long as five years.

You can use a Chapter 13 plan if you have a steady income. In other words, you are a wage earner, the owner of a small business, or one who receives a pension or social security.

Whether you are a wage earner or own a business, you must owe less than $750,000 in "secured" debts and less than $250,000 in "unsecured" debts.

Once you file under Chapter 13, your creditors cannot sue you for the money you owe them. Also, they are not allowed to write or telephone you demanding payment. Additionally, the court will not sell your property in order to pay either your secured or unsecured creditors.

How can I set up a Chapter 13 repayment plan?

We at Dudugjian & Maxey can help you write a plan that tells how you intend to pay part or all of your debts. We can also help you present your plan to the court and explain why the plan is a good one for you and your creditors.

The plan must be filed with a bankruptcy petition and filing fee in the bankruptcy court. Your filing fee can be paid in installments through your plan. Your attorney's fee, which the court will set, can also be paid through your plan.

When the court approves your plan, it will assign a person called a "trustee" to handle your repayments.

If the court allows you to repay only a part of your debts, "priority claims" must be paid in full unless those creditors say you can pay less.

Priority claims include secured debts and any federal or state income taxes you have owed for less than 3 years, as well as the court costs and trustee and attorney fees involved in setting up a Chapter 13 plan.

How can Dudugjian & Maxey help Me?

If, after consulting with one of our bankruptcy attorneys, it is determined that the best course of action to take to get you out of debt is to file bankruptcy, we at Dudugjian & Maxey will advise you as to which form or "Chapter" you should file, when you should file (since timing is important and there are restrictions to the frequency of filing), assist you in filling out the correct forms, and represent you in court.

Additional Questions Dudugjian & Maxey Can Answer for You


 Dudugjian & Maxey is available to assist you with a viable plan for dealing with your creditors and in helping you answer the question: What Can I Do If I Can't Pay My Debts?

Return to D&M Home Page