So you’re considering bankruptcy. We understand it’s a very hard decision to make. Often clients tell us they feel like a failure.
In it’s most pure form, bankruptcy is merely a legal proceeding like any other legal proceeding. Years ago there used to be a social stigma with divorce and now society has accepted it. Society, and the credit industry, are much more accepting of bankruptcy now than they were even five years ago.
So, what’s the best route for you? The ultimate goal is to relieve your financial pressures and put you in a better economic position. This is accomplished by filing a Chapter 7 bankruptcy or Chapter 13 bankruptcy.
What is the difference between Chapter 7 and 13?
Chapter 7 bankruptcy is the shortest bankruptcy, generally lasting 3 to 4 months. It is designed to eliminate debt and quickly get you a fresh start.
Most individuals inquire if they will I be able to keep their home and car? The answer to that as a general rule is yes. You won’t however be able to keep them without making required monthly payments on them. Unless you have significant amount of equity in your home or car you will be able to reaffirm the debt and keep the asset. It’s the same concept is applicable with luxury items such as motorcycles, campers etc. However, most people want to get a fresh start and eliminate luxury items and wipe out the debt.
Chapter 13 bankruptcy, is very different. It is usually three years to five years IN duration and involves making a monthly payment to a bankruptcy trustee. Many people assume that IN Chapter 13 they will have to pay back all their debts. That is not true. You continue to pay for your home and your car but in the Bulk of cases filed no money has to go to your unsecured creditors, such as credit cards, medical bills, bank overdraft and various other unsecured debts. Quite often, in the chapter 13, we reduce your car payment by either extending the length of the loan, or lowering the interest rate or in some cases Lauren to pay back down to the fair market value as opposed to what you owe. This is very helpful to people that are upside down in their vehicle.
Once you file a Chapter 7 or Chapter 13 a stay order goes into affect AND it stops garnishments, freezing of a bank accounts, creditor calls and Rastaman, foreclosures, repossession and even dining letters from creditors. He idea is to give you peace of mind and a little breathing room in order to get these re-organized.
Most people want to do a Chapter 7 bankruptcy. We understand that because it short and simple. However your bankruptcy needs to be tailored to your needs for someone that is behind on the mortgage payments and wants to see their home chapter 7 or not being any assistance but the chapter 13 would save the home. This is because we can put the payment you’re behind into the chapter 13 plan and keep the mortgage company from for closing.
There is an income test that Congress created called the mean’s test. If you make Above a certain amount of money, based on income and family size,you will have to do a chapter 13 rather than just being able to wipe out your debts in a seven.