Chapter 7 & Chapter 13 Bankruptcy
If you are considering bankruptcy as an option, you need information and guidance that will help you dispel some bankruptcy myths and determine if bankruptcy is the right option for you.
Sometimes events out of our control have an effect on our financial stability; injury, illness, job loss, divorce; or you’ve made some wrong financial choices. All of these and more can affect you, causing debt to become overwhelming.
Filing bankruptcy is not an easy choice to make. There is misinformation about bankruptcy that can lead to making the wrong decision to file or not to file a bankruptcy.
You Are Not Alone in the Process
Many individuals considering filing for bankruptcy feel embarrassed and ashamed that they have “failed” in some way. The reality is, you’re not alone and you owe it to yourself to provide a legal way for a fresh start after bankruptcy so you can be productive and be a contributing part of your community again.
This is why Federal bankruptcy laws were created in the first place. Do not get caught up with the word “Bankruptcy.” A Chapter 7 or a Chapter 13 filing is a powerful federal law that provides immediate and permanent debt relief for individuals.
Chapter 7 and Chapter 13 FAQ
Bankruptcy is a difficult process for many reasons, first and foremost, the emotional turmoil people experience when they go through difficult financial times. I am a compassionate Bankruptcy Lawyer who will be by your side during the whole process. To help, I’ve created this simple Bankruptcy FAQ for you.
Of course, if you have further questions or would like to proceed, please feel free to Contact Me.
This will be your first step to a Fresh Start.
Chapter 7 bankruptcy is a liquidation proceeding.
The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. There are exemptions for different asset categories (we will discuss this when we meet) and, thus, the majority of Chapter 7 cases are “No Asset” cases.
The debtor receives a discharge of all dischargeable debts usually within four months. Because in the vast majority of cases the debtor has no non-exempt assets, a Chapter 7 will give that person a relatively quick “Fresh Start”. Benefits of a Chapter 7 filing begin the moment that the case is filed with a legal stay that immediately prevents creditors from taking any further action against the debtor.
One of the primary purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by eliminating their debt.
Chapter 13 Bankruptcy is also known as a reorganization bankruptcy.
Individuals who want to pay off their debts over a period of three to five years file Chapter 13 Bankruptcy. Also, some debtors will only qualify for a Chapter 13 Bankruptcy if their income is above the median income level for their family size (we will discuss this when we meet).
This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. A Chapter 13 Bankruptcy can help a debtor save their home by paying the arrears over a period of 3-5 years. If the house is worth less than what is owed on a first mortgage, a second mortgage can be stripped away in a Chapter 13 filing.
In Chapter 13, a debtor must have predictable income sufficient to pay their reasonable expenses with some amount left over to pay a monthly amount to the Chapter 13 trustee. But it is extremely rare in a Chapter 13 case that the debtor ends up paying a significant amount towards their unsecured debt.
For the majority of individuals, Chapter 7 is still available to them.
There has been much written about the Bankruptcy Means Test under the new laws for Chapter 7 Bankruptcy. It’s true that there are more steps under the new laws and the Bankruptcy Means Test will result in some people having to file Chapter 13 instead of Chapter 7.
Yes, they will.
By law, all actions against a debtor must cease once the bankruptcy documents are filed.
Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments.
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt.
I will be able to advise you once I review your documents.
- A number of banks offer “secured” credit cards where the debtor puts up a certain amount of money (i.e. $500) in an account at the bank to guarantee payment. Usually, the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.
- Two years after a bankruptcy discharge, debtors are eligible for mortgage loans with terms similar to those with the same financial profile as those who have not filed bankruptcy.
- The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past.
- A Chapter 7 Bankruptcy filing will stay on an individual’s credit report for 10 years from the date of filing. But this does not mean that an individual cannot obtain credit for 10 years (the bankruptcy filing becomes less significant the further in the past the bankruptcy is). For many people, a bankruptcy filing will actually improve their credit score within a short period of time. And, as discussed above, after the discharge (about 90 days after filing the Chapter 7 Bankruptcy) a secured credit card will be immediately available to a debtor, car loans will be available, unsecured credit cards will be available within a year, and a mortgage will be available in two years.