Bankruptcy
Bankruptcy is a process allowed by Federal Law (National Law/United States Law) which allows a person or business to either eliminate their debts completely (Chapter 7 Bankruptcy) or repay their debts over a set period of time (Chapter 13 Bankruptcy) while under the protection of the Bankruptcy Court.
The following information is a high-level and quick overview of the types of Bankruptcy. For more information about Bankruptcy specifics it is important to seek out the help of an experienced Bankruptcy attorney who can fully explain Bankruptcy laws in the context of your individual situation.
Chapter 7 Bankruptcy:
In a Chapter 7 Bankruptcy, a person or business is allowed to give-up/ liquidate/wipe-out the debt which is owed. This type of Bankruptcy is common for people who have little of no income and assets but lots of debt. Most often the debt which is associated with a Chapter 7 Bankruptcy is credit card debt, medical debt, and vehicle debts. People filing a Chapter 7 Bankruptcy often will have judgments against them for past debts and even garnishments orders or liens in place already. They also typically have no mortgage or one modest mortgage payment monthly.
In these types of scenarios, so long as the person or family is not making too much money, the Bankruptcy Court will allow them to file for a Chapter 7 Bankruptcy, declare the types of debt above, and allow all of those debts to be liquidated. The Chapter 7 debtor will then move forward with a fresh or clean start and will no longer be saddled down with the strain of those debts. They will be allowed to keep their home if they like (if they choose to do so they must still continue making their monthly mortgage payments and pay off the full mortgage debt which is owed) so long as the home is not worth too much money. This is also true if the person has a vehicle loan which they desire to keep – they will be allowed to keep their vehicle so long as they continue making their monthly loan payments and pay off the full loan debt which is owed.
A Chapter 7 Bankruptcy typically takes between 6-12 months to complete from the date of filing until the final discharge of the debtor from the Court proceeding and the information will stay on your credit report for up to 10 years. Lastly, a Chapter 7 Bankruptcy can only be filed once every 8 years.
Chapter 13 Bankruptcy:
In a Chapter 13 Bankruptcy, a person asks permission of the Court to repay most or all of their debts over a set period of time (typically 5 years) while under the protection of the Bankruptcy Court. This type of Bankruptcy is common for people who have more than 1 house, more than 2 cars, and are making too much money to be able to qualify for a Chapter 7 Bankruptcy filing.
In Chapter 13 Bankruptcy, the person will be allowed to keep ownership and possession of all of their property so long as their plan is accepted by the Court and they remain current on their payments during their entire plan period. The duration of the plan and the plan payment amount will depend on their income, ability to pay, and the agreement reached with the Court.
In general, whether you file a Chapter 7 or 13 Bankruptcy, some things are true and constant for both. They are:
- Most Student Loans, Back Taxes, and Spousal or Child Support are not “wiped-out” through the filing of a Bankruptcy.
- When a Bankruptcy is filed an “Automatic Stay” goes into effect which stops collections and most debt payments from continuing during the time in which your Bankruptcy is pending.
Is Bankruptcy RIGHT FOR YOU? How will you know which Chapter to file?
These are some serious questions to consider. First, is Bankruptcy even the right step for you? An experienced bankruptcy attorney should visit with you ahead of time (in a free consultation) and inform you of all of your available options including Debt Consolidation and Consumer Law. Only after all of these possibilities have been discussed and each scenario has been applied to your present situation can you then make an informed decision as to whether Bankruptcy is right for you.
Lastly, be wary of attorney’s whom push you into a certain bankruptcy path, often the most expensive, without first providing a full explanation of why they are doing so. It is sometimes the case that an attorney may be looking out more for their own wallet instead of helping you keep money in yours.
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Attorney Brendon R. Rogers always offers a free consultation to clients regarding the filing of Bankruptcy. The meeting typically lasts about 30 minutes and when the meeting is finished you will understand which type of Bankruptcy is right for you. In preparation for the meeting, please bring a 1 page summary of all of your debt. Call our office and schedule your FREE consultation today.