Types of Bankruptcy

Chapter 7

Chapter 7 is a federal law that gives you freedom from burdensome debts and a fresh start in your finances. Some examples of debts that may be eliminated include credit card debts, medical bills, personal loans, judgments arising from car accidents, balances remaining on repossessed vehicles, and some types of income taxes.

Most people do not lose any of their property in Chapter 7 bankruptcy. The law allows us to exempt certain types and amounts of property from creditors, so that you have a true fresh start. We can make sure that you exempt everything that the law allows. If a debt is collateralized by your home or car, you can usually keep the property by continuing to make the loan payments. We can also arrange for “reaffirmation” of the mortgage or car loan. To get the full benefit of your bankruptcy, you need the guidance of an experienced bankruptcy lawyer. Our goal is for you to keep your home, car, household goods and other belongings and get rid of your burdensome debt.

Chapter 13

Chapter 13 is a plan for partial repayment of debts. Chapter 13 allows you to consolidate your debts and repay at least a portion of the debt over a three to five year period. There are no interest charges and the principle does not have to be paid in full. You pay only the amount that is reasonably affordable for you, and there is no set percentage of debt that must be paid back. It allows you to pay back only the amount that is affordable for you over a reasonable period of time.

Chapter 13 allows you to consolidate mortgage arrears and bring your mortgage current over an extended period of time. Other examples of debts that can be consolidated are back taxes, car loans, student loans, credit cards and other types of unsecured debts.

Stop Repossession

We can stop repossession of your car immediately upon the filing of your Chapter 13 case. It is often possible to get the vehicle back after it is repossessed if you file Chapter 13 quickly. The repo man will not touch your car if he knows that you have filed a Chapter13 case. We can consolidate the loan into the Chapter 13 repayment plan. In some cases, we need only pay what the vehicle is worth and not the entire loan.

Stop Foreclosure

Even if foreclosure of your home is started, Chapter 13 can stop the foreclosure as long as it has not been sold at sheriff’s sale. If you need help understanding your rights in the foreclosure process, please call us. Prior to the sheriff’s sale, Chapter 13 gives you the right to pay back the arrears through your debt consolidation over an extended period of time. You must make the regular monthly mortgage payment after the case is filed.

Student Loans

Although student loan debts are not normally eliminated by Chapter 13, student loans can be consolidated and partially repaid through Chapter 13. While you are making payment on your student loans through Chapter 13 you are protected from bill collectors and wage garnishment.

Better than refinancing

You may be tempted to try to avoid bankruptcy by refinancing your home. This is only a good idea if you are sure that you will be able to make the payments. If you are not able to include all of your debt in the refinancing, you may find that you still need to file bankruptcy, but you will not be able to eliminate debt that you have financed into your mortgage. Bankruptcy allows you to preserve the exempt equity in your home. Refinancing does not.

Changes in Bankruptcy Law

The new law will prevent very few people from filing for bankruptcy protection. Bankruptcy is still available for the general public and debts can still be eliminated.

There are now some additional steps to take to file a bankruptcy. Before you file for bankruptcy protection, you must complete a credit counseling session with a credit counseling agency that has been approved by the court. The credit counseling session can be done over the phone or internet and will take about a half hour to an hour. There will normally be a small fee.

After you file your bankruptcy, you must complete a financial management course with a court-approved agency. There will be a small fee for this course, which can also be taken over the internet or by filling out a workbook.

The waiting periods are now longer between bankruptcy filings. After filing a Chapter 7 bankruptcy, you cannot file another Chapter 7 bankruptcy for 8 years. If you file a Chapter 7 bankruptcy, you cannot file a Chapter 13 bankruptcy for 4 years.