Bankruptcy helps thousands of people get a financial fresh start every
year. If you are considering filing for bankruptcy, you have two options:
Chapter 7 bankruptcy, or Chapter 13 bankruptcy. Your ability to file either
of these types of bankruptcy cases will depend on your income, assets, debts.
Chapter 7 Cases
A Chapter 7 case is the simplest form of bankruptcy. This type of case
is designed to wipe out most of your unsecured debt. Unsecured debt is
generally debt like medical bills, credit card payments, and other accounts
that are not secured by a loan. In contrast, a mortgage on a house or
an auto loan on a car makes these types of debts secured. A Chapter 7
bankruptcy cannot remove your obligation to pay most secured debts.
In order to qualify for a Chapter 7 bankruptcy, you must have little or
no disposable income and few assets. Chapter 7 debtors are only allowed
to keep a certain amount of property which is known as exempt property.
Often, Chapter 7 bankruptcy exemptions only protect $2,000-$3,000 worth
of assets. Any property that is not covered by an exemption may be sold
by the trustee in order to pay your debts.
Once the paperwork for a Chapter 7 case is completed, you will have to
attend a meeting of the creditors, also known as a 341 meeting. At this
meeting, you and your attorney will meet your trustee, who administers
your case. Occasionally, creditors may attend this meeting if they have
an objection to your bankruptcy case. However, this is relatively rare
and usually only occurs when a debtor is accused of fraud.
If your Chapter 7 case is approved after your 341 meeting, there will be
a 90-day waiting period to allow any other creditors to file a claim or
an objection. If no one objects to your bankruptcy and there are no outstanding
issues, you will receive a bankruptcy discharge and you will no longer
owe any of the debts listed in the Chapter 7 case.
Chapter 13 Cases
If you make too much money to qualify for a Chapter 7 case, you will have
to file a Chapter 13 bankruptcy. Chapter 13 cases are more like a financial
reorganization, and allow debtors to pay off debts over a period of 3
to 5 years.
Debtors in a Chapter 13 case are allowed to keep all of their property.
In exchange, the debtor has to pay back at least a portion of his or her
debts during the course of the case. Rather than make several payments
to multiple creditors, the debtor will make one payment every month to
the trustee, who will distribute the money to the creditors. At the end
of the 3 to 5 year period, any unsecured debts that are not fully paid
will be discharged, just like in a Chapter 7 case.
Chapter 13 cases are often used by homeowners who have fallen behind on
their mortgages. To avoid foreclosure, a Chapter 13 case allows a homeowner
to catch up on the missed payments over a period of time. The debtor will
need to continue to make regular monthly mortgage payments (either through
the trustee or outside of the plan), and the bankruptcy case will prevent
the mortgage lender from moving forward with a foreclosure. These cases
also allow homeowners to strip unsecured liens from their home.
Filing for bankruptcy is an important decision. While bankruptcy can help
your credit in the long run, your credit score will take a hit initially.
Chapter 7 bankruptcies will stay on your credit report for 10 years, while
Chapter 13 bankruptcies will stay for 7 years.
Bankruptcy cases are complicated, and the consequences for failing to follow
the court’s rules can be severe. It is rarely wise to attempt a
bankruptcy on your own, and it is important to seek out the help of an
experienced bankruptcy attorney.
At Loan Lawyers, our attorneys understand the different types of bankruptcies
and can help you make the best choice for your financial future. Our lawyers
have over 90 years of combined experience, and can help you get the fresh
start you need.
To schedule your free consultation, contact Loan Lawyers today by calling
(844) FIGHT-13 (344-4813).