Bankruptcy is a legal process under Federal law that requires a case to be filed in bankruptcy court.
Filing Chapter 7 Bankruptcy
Description
Bankruptcy is a legal proceeding under Federal law that requires a case to
be filed in bankruptcy court. Chapter 7 Bankruptcy cases are usually
short (90 to 120 days) but Chapter 7 does not allow you to "catch up" on
payments you are behind on. Except in cases of dishonesty, chapter 7
results in most (but not all) debts being eliminated in exchange for giving
up any property that cannot be protected under the applicable law. Most
people filing chapter 7 bankruptcy do not have to give up any property.
Pros
While only an attorney can give you legal advice, filing bankruptcy is designed
to give honest people in financial distress a much-needed "fresh start."
Not all debts are eliminated in chapter 7 bankruptcy, but you will not have
to pay anything for those which are eliminated (discharged).
Chapter 7 generally stops all creditor actions against you, but some creditors
are only stopped temporarily, for a short period of time.
The typical Chapter 7 case only takes about 4 months from beginning to end.
Some individuals in financial trouble experience stress that affects mental,
emotional and physical health. Financial stress may also affect
personal relationships and work performance. Bankruptcy can often provide
relief from this stress.
Many people can get a mortgage or other credit within a year or two of bankruptcy.
Cons
If you are behind on a secured debt such as a mortgage or car loan, Chapter
7 does not provide a sure way for you to "catch up" on these payments
to keep the property.
You may or may not be able to keep all of your property in Chapter 7.
If you are not completely honest with your attorney or fail to understand
all the information you are required to disclose, then Chapter 7 bankruptcy
can create more problems rather than solving the ones that you have.
Chapter 7 Bankruptcy will stay on your credit report for up to 10 years.
You will be required to disclose a great deal of financial information, supply
documents, and fill out paperwork.
If you find that bankruptcy is the best choice for you, be aware that it
may not be the solution to all your problems.
There are certain debts that cannot be discharged in Chapter 7 bankruptcy,
including child support, certain taxes and most student loans.
What to avoid
Avoid methods of filing Chapter 7 bankruptcy in which you do not received
legal advice from a lawyer. Bankruptcy is a legal proceeding and only
an attorney can tell you the law about important issues such as whether your
property will be protected. Failure to get advice from an attorney
may cause result in you losing property or other unintended results.
Be cautious of "do-it-yourself" bankruptcy methods
such as Internet bankruptcy preparation and "kits" or books that
claim to teach you how to file your own bankruptcy.
Bankruptcy laws changed in October of 2005, and laws about protecting property
often vary from state to state.
Without proper legal advice, you might lose property unnecessarily or have
other unexpected complications.
Avoid assumptions. Many times the rumors about bankruptcy that you have "heard" are
not the truth.
What to look for
Look for an attorney that is experienced in bankruptcy.
Don’t assume that you cannot afford legal advice; many bankruptcy lawyers
have methods to assist you in paying their legal fees.
Be sure you fully understand what is required of you and what you can expect.
Filing Chapter 13 Bankruptcy
Description:
Bankruptcy is a legal proceeding under Federal law for people requesting relief
from their debt. In a Chapter 13 bankruptcy, you must propose a "plan" to
pay something toward your debts over time. The amount you must pay is
determined by a number of factors. Under the right facts, a chapter 13
bankruptcy case allows people to stop foreclosures or repossessions and keep
their property. You are not required to give up any property in a chapter
13 case. A Chapter 13 case can last up to 5 years.
Pros
In chapter 13 bankruptcy, it is possible to stop foreclosures and catch up
on delinquent mortgage payments.
In chapter 13 bankruptcy, it is possible to deal with back taxes that you
owe.
Most of your legal fees will be included in your monthly chapter 13 plan
payment so you generally don’t need to come up with large legal fees
to file a chapter 13.
Chapter 13 is similar to debt consolidation, but because it is under federal
law, all of your creditors are required to participate and your unsecured
creditors are usually paid less than in a non-bankruptcy debt management plan.
Chapter 13 bankruptcy stops all creditor actions against you, with some exceptions.
In chapter 13, you generally get to pay what you can afford to your creditors
over time in satisfaction of your debts.
Some individuals in financial trouble experience stress that affects their
mental, emotional and physical health. It may also affect their personal relationships
and their work. Bankruptcy can provide relief from this stress
in some circumstances.
Under certain circumstances, it is possible to get a mortgage or other credit
while you are in chapter 13.
Cons
In most cases, Chapter 13 requires you to make monthly payments for 3 to
5 years.
Your monthly payments will usually include fees to your Chapter 13 attorney
and the Chapter 13 Trustee, for the administration of your case.
You will be required to disclose a great deal of financial information, supply
documents, and fill out paperwork.
If you are not completely honest with your attorney or fail to understand
all the information you are required to disclose, then bankruptcy can create
more problems rather than solving the ones that you have.
Chapter 13 bankruptcy can stay on your credit report for 7 to 10 years.
Chapter 13 bankruptcy normally does not change your payments under mortgage
loans. Usually it merely gives you a chance to catch up delinquent payments.
If you lose your job or your income drops, you may not be able to maintain
your chapter 13 payments. If this happens, and your case can be dismissed
or, if appropriate, you can change your case to a chapter 7.
There are certain debts that cannot be eliminated in bankruptcy.
What to avoid
Avoid methods of filing bankruptcy in which you do not received legal advice
from a lawyer. Bankruptcy is a legal filing and only an attorney can
tell you the law about important issues such as whether your property will
be protected. Failure to get advice from an attorney may cause unpleasant
surprises and unintended results.
Be cautious of "do-it-yourself" bankruptcy methods
such as Internet bankruptcy preparation and "kits" or books that
claim to teach you how to file your own bankruptcy. Chapter 13 is complicated,
bankruptcy laws changed in October of 2005, and laws about protecting property
can vary from state to state.
Without proper legal advice, you might lose property unnecessarily or have
other unexpected complications.
Avoid assumptions. Many times what you have "heard" is not
the truth.
What to look for
Look for an attorney that is experienced in bankruptcy.
Don’t assume that you cannot afford legal advice. Chapter 13 attorneys
usually receive most of their payment over time, though your monthly plan payments.
Be sure you fully understand what is required of you and what you can expect.
