Bankruptcy is a procedure under federal law Title 11 of the United States Code that can give people facing debts they are unable to pay a Fresh Start by discharging the debt. The Bankruptcy law was amended in 2005 imposing major changes. There are two types of Consumer Bankruptcies.
Chapter 7 - is a liquidation that results in a Discharge of most unsecured debt. A Discharge means that you legally do not owe the debt and those creditors cannot pursue collection against you. Most people in a Chapter 7 will still keep their home, cars, household goods, retirement accounts, and many more personal assets.
Chapter 13 - is a reorganization of debt that usually lasts five years. Regular income to fund the plan of repayment is required. In most cases upon completion of all payments under a Chapter 13 a person will receive a discharge of most unsecured debt as in the Chapter 7. Several reasons why a person may file a Chapter 13 Bankruptcy include the following:
If a person is behind on mortgage or vehicle payments, Chapter 13 allows the person to get caught up over time and keep their home or vehicle
If a person has equity/value in real estate or personal property and they do not want to lose this property in a Chapter 7, Chapter 13 allows the person to pay the non-exempt equity to their creditors over time and keep their property
If a person does not qualify for a Chapter 7 because of income or a previous bankruptcy filing, Chapter 13 allows the person to pay a percentage of their debt based on the results of a Means Test which looks at the last six months of income and takes into account future expenses.
How much does it cost to file Bankruptcy? The filing fee for Chapter 7 is $335 and for Chapter 13 it is $310. The attorney fees are set on a case by case basis and determined during the initial consultation.
When will the creditors stop harassing me? You are not legally protected from your creditors until your Bankruptcy case is actually filed with the Court, however, retaining my office can significantly reduce the creditor calls and perhaps slow down collection.
Do I have to include all of my creditors? Yes, you are required to list all creditors, even those whom you want to reaffirm your accounts with such as your home and vehicle.
Will I lose my home or car? Most people will keep their home, cars, and other personal property. My office will evaluate your assets and advise you if you have any non-exempt or unprotected property and what your options are to keep it.
How long does a Chapter 7 Bankruptcy take? About 3-4 months from the date the case is filed.
Do I have to go to court? You will have to attend one informal hearing called the Creditors 341 Meeting with the Trustee appointed to your case.
How long does a Chapter 13 Bankruptcy take? Usually 5 years from the date the case is filed, however, in some cases the plan may take 3 years.
Does my spouse have to file with me? No, but if you are living together in the same household your spouse’s income will be included in your Schedules.
What type of debt is dischargeable in a Chapter 7? Credit cards, charge cards, medical bills, payday loans, bank loans, personal loans, unpaid rent, unpaid services, repossession or foreclosure debt, utility bills, judgments from vehicle accidents, and some tax debt. Non-dischargeable debts include debts related to domestic support orders, fraud, drunk driving, malicious injury, student loans and some tax debt.
If I have a pending lawsuit or judgment in State Court, will that be included in my bankruptcy? In most cases yes with the exception of some family support orders.
What debts must be paid in my Chapter 13 plan?
Mortgage arrears and future mortgage payments if delinquent at the time of filing
Vehicle loan balances or the value of the vehicle if you have owned it for more than 2 1/2 years
Priority tax debt
0% to 100% of unsecured debt depending on your individual case
Is tax debt dischargeable? If more than three years has passed since your tax debt became due and you filed timely returns, it may be dischargeable.
How do I decide whether to file Bankruptcy? The decision to file Bankruptcy is often a personal one governed by your finances. Problems Bankruptcy can help with include:
If you are unable to make minimum payments or are barely just making those minimum payments with no light at the end
Lawsuits against you by creditors
Foreclosure or Repossession
Will my cosigner be protected under the Bankruptcy? If you file a Chapter 7, your cosigner will still be obligated to the creditor. If you file a Chapter 13, your cosigner is protected while your case is pending.
Who will know I have filed for Bankruptcy? The Court will notify your creditors and the IRS of your filing. Bankruptcy information is available to the public if the information is sought out but usually your employer will not be notified unless you are under a wage order from the Court.
Will I be able to get credit to purchase a home or vehicle after filing Bankruptcy? Yes, most people are able to obtain these types of loans within the first year after filing dependent on their income. Also, Reaffirming on secured debts such as your home or vehicle loans will help rebuild your credit. Bankruptcy can stay on your credit report for up to 10 years, however, in most cases a person’s credit will go up in the first 12 months after filing.