What is the difference between Chapter 7 and Chapter 13 Bankruptcies?Bankruptcy law is law that is meant to give people who find themselves in considerable financial distress a process to reduce the debt and get back on financial track. While many creditors want the general public to think bankruptcy debtors are just deadbeats, the fact is most debtors suffered a life altering event that has had serious financial setbacks. Many times it is an extended period of unemployment, serious medical illness, or a divorce that causes the problems. Unfortunately, people are afraid to consider bankruptcy until they absolutely have no other choice. That means they usually run down their retirement funds and spend good money after bad. People who need to file bankruptcy, generally should file sooner than they do.
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"Chapter 13" Bankruptcy is called debt readjustment. This allows people, who have assets that they want to keep but are not exempt, to catch up on some of the payments while getting out of other debt. This plan allows people to keep homes with a good amount of equity. This process includes a payment program and usually takes years to complete.
Two key aspects of bankruptcy are the automatic stay and discharge. When the petition for bankruptcy is filed, an automatic stay is instituted. That means creditors must stop all legal proceedings and collection actions against the debtor.
The discharge is when the debtor is release from all the unpaid debts. It is the reason to file for bankruptcy.
Can I keep my car if I file Bankruptcy?
Generally, we can work it out so you can keep your car. It is not a guarantee but it is possible. You can keep your car under Chapter 7 if it doesn’t have too much equity and your budget shows you have enough to pay for it after paying your other expenses. Under Chapter 13, you may be able to include the back payments into your payment plan and catch up your arrears to keep your car.
Can I keep one of my credit cards?
Generally no. Paying one unsecured creditor over or more than another is no allowed. It is called a preference and the court will not allow it. This included loans taken from your family or friends.
Do I qualify for Bankruptcy?
That is not an easy question to answer. For Chapter 7, debtors must pass the “Means” Test. That is an analysis of their income to determine how much they make relative to average costs for similarly situated families as established by government studies. If debtors earns more than the median income by a certain percent, they will not be able to file under Chapter 7.
For Chapter 13, debtors must have the capability to complete a payment program. If debtors don’t have enough disposable income, the Trustee will not approve a payment plan.
When will my debts go away or when will the creditors stop bothering me?
The most important points to most debtors are the filing of the bankruptcy petition and the discharge. The filing of the Bankruptcy petition immediately establishes an automatic stay preventing creditors from attempting to collect debts. This is when the calls stop, which is what probably pushed the debtor to file bankruptcy. The stay is instituted upon filing in both Chapters 7 and 13.
The most important point is the entry of discharge. The discharge is what relieves debtors of the debt and concludes the consumers’ bankruptcy. Chapter 7 discharge occurs after the creditors meeting. In Chapter 13, the discharge comes after the payment plan is completed. If a debtor fails to complete the payment plan, the bankruptcy is dismissed and no discharge is entered. That means the creditors can start collection actions again.
What do I need to file Bankruptcy?At Wells, Hoffman, Holloway & Medvesky LLP, we will provide our clients with an extensive questionnaire that helps the client focus on their finances and gather all the information needed to complete the bankruptcy documents for filing their case. We also provide a list of required documents used to support the information provided by the client in the questionnaire. Clients must complete credit counseling before the court will accept a bankruptcy petition. Our office can provide you with a list of approved credit counseling agencies or you can find them on the Court's website. Also, a person must have filed all his or her tax returns for at least the last our years.. Again, we work closely with our clients to make sure we have everything the court requires.
If you want assistance, legal representation, or just want to know more about Mark Medvesky or Wells, Hoffman, Holloway & Medvesky LLP check out our website at www.whhmlaw.com.
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