Important FAQ's
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, also known as "liquidation," is a legal process which discharges your legal obligation to repay most of your unsecured debts, meaning you are no longer legally required to repay all of your credit card, medical bills, etc. If you own more property than can be protected using exemptions, then some of your unsecured creditors may receive payment on your behalf from the bankruptcy estate. There are, however, certain unsecured debts that are not dischargeable in Chapter 7 bankruptcy such as certain taxes, domestic support obligations, student loans, and others. You should consult an experienced bankruptcy attorney to understand your rights under bankruptcy laws and right to a fresh start.
Can I File Chapter 7 Bankruptcy?
Since the law changes in 2005, filing a chapter 7 bankruptcy requires an analysis of your household income for the prior 6 months. If the household income for the relevant period is below the median income for a family of your size in your state, then you may file Chapter 7 bankruptcy. If your household income is greater than the median income for a family of your size in your state, then further analysis of your household income and allowable expenses is required.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a debt management plan administered by the bankruptcy court. A repayment plan is submitted to the trustee and the bankruptcy court for approval. The plan requires monthly payment to the bankruptcy trustee for 36 to 60 months. Upon receipt of the monthly payments, the trustee pays the creditors in accordance with the terms of the plan. Upon completion of the plan, any unsecured debts that remain unpaid may be discharged, and a fresh start is provided to the debtor.
Who Can File Chapter 13 Bankruptcy?
A Chapter 13 debtor must have regular monthly income in order to make the plan payments. In addition, there are certain debt limits for total secured and unsecured debts which can not be exceeded to qualify for a Chapter 13 bankruptcy. Chapter 13 may be a better option for a debtor who owns more property than can be protected from creditors, i.e. non-exempt assets. You may keep your non-exempt property.
Does the New Bankruptcy Law Affect Me?
Yes, the new bankruptcy law enacted in 2005 affects everyone seeking to file bankruptcy. Primarily the new requirements involve taking two education courses about debt and financial management. The changes in the new law, however, did not change an essential benefit from filing bankruptcy, a fresh start.
How Can I Stop Creditor Harassment?
Upon filing either a Chapter 7 or a Chapter 13 bankruptcy your creditors will receive notice of your bankruptcy and the implementation of the automatic stay, which orders the creditors to stop their collection efforts immediately, including foreclosure proceedings, threats of repossession, wage garnishments, etc. Once the automatic stay is in place it is illegal for creditors to continue their debt collection efforts without seeking permission from the bankruptcy court. You are therefore able to stop the phone calls, letters and worries.
Will Filing Bankruptcy Affect My Credit?
Your credit will be affected by filing bankruptcy. It will be reported in the public records section of the credit bureau report for up to 10 years, and the debts included in your bankruptcy will be reported for up to 7 years. However, upon receipt of your discharge order you will be able to start reestablishing your credit almost immediately. In fact, in most instances your credit score will increase shortly after you file bankruptcy.
Bankruptcy can provide a "fresh start."
Does my spouse have to file too?
If most of the debt is joint with your spouse, then it may be more appropriate for you and your spouse to file together. In Chapter 7 bankruptcy the creditor may seek to collect against any co-debtor (including your spouse) who is not protected by the bankruptcy laws. In Chapter 13 bankruptcy, a co-debtor may be protected against collection efforts.
What is a Debt Discharge?
A Discharge is an order from the bankruptcy court releasing your continued liability to repay certain debts discharged in the bankruptcy. Not all debts can be discharged in bankruptcy, such as certain tax obligations, domestic support obligations, student loans, and other debts.
Is Chapter 7 or Chapter 13 Bankruptcy the Right Option for Me?
Chapter 7 bankruptcy may eliminate most, if not all, of your dischargeable unsecured debt, allowing you to reestablish your credit almost immediately after receiving your discharge.
Chapter 13 bankruptcy may also eliminate some or all of your unsecured debt. It may be a better option if you have regular income, want to catch up on your secured debt payments (such as for your home or your car), or own non-exempt property you wish to keep.
E-mail: tjking@planlaw.com
