READJUSTING DEBT AND WRITING CONTRACTS

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We no longer have debtor's prison. What sense does it make keeping someone who wants to work from working? We also no longer have "transportation:" Where would the government send people? Siberia? Mars? Bankruptcy allows people to get a fresh start by keeping their existing creditors at bay and allowing industrious Americans to get back to work, pay their new creditors, pay their taxes, and join mainstream America as productive citizens once more.

The Stay and the Discharge

Bankruptcy allows people with more debt than they can presently repay (we'll call them "debtors") to take charge of their lives. The two most important aspects of bankruptcy are the first and last things that occur in a bankruptcy case-and are the things that allow a debtor to take control of his or her life. The first is the "automatic stay"; the second, the "discharge."

A "stay" is a stop order, which is put in place by the federal laws as soon as the first papers, called the "petition," are filed with the bankruptcy court. This stay is a federal stop order that freezes all the lawsuits and actions by creditors to collect debts. The stay stops evictions, foreclosure sales, and lawsuits. Perhaps best of all, it stops the nasty telephone calls. Collection agencies, when informed by the debtor that a petition has been filed, can no longer call or write to the debtor demanding collection of a debt. Instead, they must deal with the debtor's lawyer.

The stay may be permanent or temporary, depending on the circumstances of the case. But in any event, the automatic stay gives a debtor breathing room from his creditors by stopping all the actions that creditors may take against the debtor to enforce an outstanding debt.

The second most important aspect of a bankruptcy filing is the "discharge:" The discharge is the last-and most sought after—event that occurs in a bankruptcy case. When a debt is discharged, it is legally canceled. No person or entity can try to collect that debt in the future. The debtor can earn a living without the fear that creditors will attack his future paychecks, can save money without the fear that assets in bank accounts will be seized, and can plan for the future without fear that the past will make the future unbearable.

The theory here is that if debtors could not get relief from past debts, they would never try to earn a living in the future, for fear that future earnings would be taken.

The law encourages people to plan for a constructive future by allowing debtors in bankruptcy to discharge their past debts.

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