When a City Councilperson Files for Bankruptcy

Cynthia Sterling became the first sitting city councilperson to file for personal bankruptcy in the history of Fresno, California. While according to the city attorney the move won’t cost Sterling her official city position, it did raise eyebrows in the community about her ability to help allocate the city’s money. Sterling filed for Chapter 13 bankruptcy protection, which required her to pay back the debts over five years.
Sterling listed some $95,000 in debts in the filing, about $69,000 in assets and an annual income of $65,000 for her city council position. She claimed the bulk of her debts included expenses incurred when she inherited her parents’ funeral home business upon their deaths. The local newspaper reported that Sterling said she was doing the responsible thing by choosing to pay off the debt in a Chapter 13 filing. She told the newspaper that she handles city money responsibly.

Bankruptcy Creditor Collections

U.S. bankruptcy law requires creditors to act in a certain manner during bankruptcy proceedings. Once an individual files for bankruptcy, the U.S. Bankruptcy Court mails letters to each of the individual’s creditors, notifying them of the filing. Once they receive this notification, creditors are required by law to cease all collection activities immediately. This process usually takes a couple of weeks. If an individual receives a collection call after filing for bankruptcy and before the creditor receives the notification letter, the individual may directly give the creditor the case number and ask the organization not to call during the legal process.

Creditors can be held liable for not abiding by these bankruptcy rules. The creditor can be sanctioned by the U.S. Bankruptcy Court and held responsible for legal fees for contacting such debtors.

Keeping Property after Bankruptcy

If an individual files for Chapter 13 bankruptcy protection, the individual keeps all current property as long as he or she meets the requirements set forth in the law. Most Chapter 13 filing cases simply require the individual to continue paying on car notes or home mortgages as if he or she hadn’t filed bankruptcy at all.
In a Chapter 7 bankruptcy case, the individual keeps any property listed as exempt on the bankruptcy filing. To determine whether an individual can keep such property, the trustee in the bankruptcy case will look at the value of the property such as a car or a home. If it makes no difference to the mortgage bank or the creditor of the auto loan, the individual would simply keep those pieces of property.



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