WHAT A CHAPTER 7 BANKRUPTCY CAN AND CANNOT DO
Chapter 7 can wipe away unsecured debt such as credit card debt, most personal loans, and medical bills to name a few. It will also put an end to creditor harassment and wage garnishment. For your part, you will have to give up any non-exempt personal property and assets to the court-appointed Trustee. The Trustee will liquidate those assets to pay your creditors. Don't worry that you'll have to give up everything you own. Most people who file for Chapter 7 will not have any non-exempt assets or property and it is not likely that you will either.
Chapter 7 cannot save you from home foreclosure or car repossession unless you "reaffirm" your mortgage or car loan in the process. This means you have to agree to make-up any deficiencies (back payments) immediately and continue making your regularly scheduled payments on time. If you think that you cannot meet these conditions and want to keep your house or car, then Chapter 13 may be your best option. Likewise, Chapter 7 will not get rid of every debt. It will not get rid of a tax debt for taxes less than three years old. It will not get rid of student loans. It will not absolve you of domestic support obligations such as child support or alimony.
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KEEPING YOUR HOME
It is almost never too late to avoid foreclosure. Filing for bankruptcy triggers an automatic stay that puts an immediate stop to any home mortgage foreclosure proceedings up to the sheriff's sale. But because the law requires you to attend one consumer credit session before you can file, and because it does take some time to gather all the necessary paperwork — there is a point in time when stopping foreclosure may no longer be an option. KEEP YOUR HOME AND STOP FORECLOSURE BY CALLING 574-255-1147 NOW!
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THE MAJOR MYTH ABOUT CHAPTER 13 BANKRUPTCY
The major misconception people have about Chapter 13 is that they will still have to pay all of their debts off AND suffer the credit consequences of a personal bankruptcy. In reality, it is far more likely that you will pay off only a portion of what you owe based on available funds after a reasonable normal monthly budget and allowable living expenses are taken into account for your size of household. Put more simply, you will pay what you can afford to pay while still maintaining a reasonable standard of living.
THE BENIFITS OF CHAPTER 13
While bankruptcy alternatives such as unsecured debt consolidation loans or debt settlement agreements can be useful if you are dealing primarily with credit card debt — Chapter 13 is a far more versatile solution for most people. A Chapter 13 bankruptcy is the best option for people who want to save their home or car, but who are behind on payments and cannot immediately make good on those debts and continue making regularly scheduled payments as well. Chapter 13 gives you time to make up any back payments and allows you to keep the home or car in your possession.
OTHER ADVANTAGES OF CHAPTER 13
- Repayment plans, typically 36-60 months in length, are modifiable. If you become ill, lose a job, or have something else happen that affects your ability to meet payment obligations, you can seek to have the plan altered to reflect that.
- Interest and penalties on non-dischargeable tax debt will stop accruing once you file
- Debts assumed as part of a divorce can be disposed of in Chapter 13 bankruptcies
- Car loans can be modified in certain circumstances
- Co-signers can be protected so long as you continue to make your regularly scheduled loan payments
- Non-exempt property can be kept so long as you continue to make your regularly scheduled payments
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COMMON MYTHS
- "Chapter 7 wipes away all of my debts, right?"
No. While Chapter 7 will erase most debts — others such as student loans, child support, alimony obligations and debts incurred by fraud are not likely to be wiped away in Chapter 7.
- "The new laws make Chapter 7 impossible to qualify for."
No. Although the new laws do steer some people towards Chapter 13 — most people who would have qualified for Chapter 7 under the old laws are still able to do so today.
- "My reputation will be ruined."
No. Unless you're a celebrity, public official, or another type of well-known person, chances are good that the only people who'll be aware of your bankruptcy are the creditors affected by it. Even then, most people experience financial difficulties at some point or other in their lives and understand how easily debt can spiral out of control.
- "I'll never be able to buy a car or get another mortgage."
Again, no. A Chapter 7 bankruptcy will stay on your credit report for up to 10 years, a Chapter 13 for up to seven. And although it does take some time to rebuild your credit after bankruptcy, most people can accomplish this in less time than you might think — especially if they reaffirmed a home or car loan in the bankruptcy process.
- "I owe too much in taxes; bankruptcy can't help me."
While this statement could be true, it is not always the case. In cases where tax returns have been filed and the taxes are more than three years old, the older taxes may be dischargeable.
- "I went through bankruptcy once; I'm not eligible."
No. If there were a rule that said you can only have one major injury, or one illness, or lose one job, or have one and only one bad thing happen to you over the entire course of your life — if there were a rule like that then…maybe. But there's not a rule like that and the U.S. Bankruptcy Code reflects that fact. A Chapter 7 may be filed once every eight years. A Chapter 13 can be filed on the heels of a Chapter 7 but if you want to receive a discharge of debts in the Chapter 13 you must wait at least four years between a Chapter 7 and a Chapter 13.
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WHAT TO EXPECT FROM THE BANKRUPTCY PROCESS
At Marnocha & Associates, we will walk you through the requirements and procedures involved in a Chapter 7, Chapter 13, or Chapter 11 bankruptcy. In general terms, these include:
Before You File — Before filing for bankruptcy, you will have to complete one consumer credit counseling session. You will also need to provide paperwork documenting your monthly income; monthly living expenses; secured and unsecured debts; student, personal, or business loans; real estate holdings; personal property and assets; any major financial transactions in the past two years; and copies of your last two tax returns. In short, you will need to provide your creditors and the bankruptcy court a full and honest disclosure of your financial situation. Anything less and there could be major problems.
Filing — Once the paperwork has been collected, our lawyers will review the situation with you and explain your options, including the non-bankruptcy alternatives available and which type or types of bankruptcy protection you are eligible for. After you've chosen the direction, we'll file the bankruptcy petition along with schedules for property and other exemptions available to you with the federal bankruptcy court. Once your petition has been filed, an automatic stay goes into effect prohibiting your creditors from contacting you directly and putting a stop to wage garnishment and home foreclosure proceedings.
After Filing — After filing, the court then appoints a Trustee to pay your creditors, review the documentation you have provided, and raise challenges to any of your information. The Trustee will also schedule what is known as a 341 meeting with your creditors. Although few creditors bother attending them, you are obligated to attend by law. The law also requires you to complete an additional debt management course to complete the bankruptcy process. If you have filed under Chapter 13, a judge will review the repayment plan we've proposed, you begin making your payments 30 days after the petition is filed.
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