About Bankruptcy

Your Options Under the U.S. Bankruptcy Code

Overview

Bankruptcy is a very serious matter. Individuals should give very serious consideration as to whether to file a bankruptcy case. Bankruptcy should be viewed as a “last resort” for protecting property or getting out of debt. I will arrange a consultation to assist you with deciding if bankruptcy is right for you.

The following information is offered as an overview of available options under the U.S. Bankruptcy Code. Individuals experiencing problems due to unpaid debts should consult an attorney for further information. There are two types of Bankruptcy cases that are available to most individuals: Chapter 13 Bankruptcy (also known as “Debtors Court” or “Debt Consolidation”) Chapter 7 Bankruptcy (also known as “Straight Bankruptcy”)

Chapter 13 | also known as “Debtor’s Court” or “Debt Consolidation”

Who may file a chapter 13 case?

Chapter 13 is designed for individuals with regular income who are temporarily unable to pay their debts, but would like to pay their debts in installments over a period of time. In a Chapter 13 case, individuals are allowed to pay their debts over a period of time. A Chapter 13 case is similar to a debt consolidation plan.

What happens after you file Chapter 13?

After filing a Chapter 13 case, individuals are granted “relief” from their creditors. Creditors must cease collection on debt. This means that creditors are prohibited from contacting individuals by telephone, mail or otherwise to demand repayment. Creditors are prohibited from taking actions to collect money or obtain property from individuals. Creditors may not repossess individuals’ property. Creditors are prohibited from starting or continuing lawsuits or foreclosures. Creditors are prohibited from garnishing or deducting from individuals’ wages.

Reasons for filing Chapter 13
    1. To stop foreclosure on home
    2. To stop repossession of automobiles
    3. To stop liens or garnishments due to unpaid taxes
    4. To stop garnishment for payment of other debt
    5. To stop suspension of drivers license due to unpaid accident claims
    6. To stop utility shut off
    7. To stop lawsuits, judgments, and liens
    8. To stop harassing collection phone calls
What types of debt can be included in Chapter 13?
  1. past due mortgage payments
  2. automobile loans
  3. installment loans
  4. credit card debt
  5. past due alimony
  6. past due child support
  7. student loans
  8. past due taxes
  9. past due utility bills
  10. medical bills
What is the payment timeline?

An individual who is experiencing financial difficulty usually consults with an attorney to develop a plan to repay debt using future earnings. The usual period allowed by the court to repay the debt is three (3) years, but no more than five (5) years.

Can I keep my property?

An individual may keep all of his/her property as long as he/she continue to make payments in the Chapter 13 case.

How do I pay my attorney?

Attorney fees may be included in the plan to repay debt. Individuals may not have to pay attorney fees “up front” in order to file a Chapter 13 case.

How long does Chapter 13 affect my credit score?

A Chapter 13 case stays on an individual’s credit report for seven (7) years. See the “Recovery” section of the website. An Attorney will answer further questions about reestablishing your credit.

Chapter 7 | also known as “Straight Bankruptcy”

Who may file a chapter 7 case?

Chapter 7 is designed for individuals with financial difficulty who do not have the ability to pay their existing debt. In a Chapter 7 case, an individual files a petition with the Bankruptcy Court requesting that the Court discharge or get rid of his debts.

Reasons for filing Chapter 7
  1. Individual cannot pay his/her bills as they become due
  2. Individual has debts that are dischargeable under Chapter 7 case
  3. Garnishments
Generally the following types of debts can be "discharged" in a Chapter 7 case
  1. installment loans
  2. credit card debt
  3. other unsecured debt
  4. medical bills
  5. deficiency balances due after a foreclosure or repossession
Debts which may not be discharged in Chapter 7 case include
  1. most taxes
  2. child support
  3. alimony
  4. student loans
  5. court ordered fines and restitution
  6. debts obtained through fraud or deception
Can a creditor still make me repay debts?

Creditors cannot ask you to repay debts which have been discharged.

Can I keep my property after filing Chapter 7?

Under certain circumstances you may keep property that you have purchased subject to a valid security interest such as a house, car, furniture, etc. An attorney can explain the options that are available.

When do I pay my attorney?

Payment of Attorney fees and court costs can be arranged with the attorney.

How long does Chapter 7 affect my credit score?

Chapter 7 stays on an individual’s credit record for ten (10) years. See the “Recovery” section of this website. An attorney will answer further questions about reestablishing your credit.