DISCLAIMER: This publication and the information included in it are not intended to serve as a substitute for consultation with an attorney. Specific legal issues, concerns and conditions always require the advice of appropriate legal professionals.
A Chapter 13 bankruptcy discharges (eliminates) only those debts provided for in the budget plan set up by the court. Certain debts, such as spousal and child support; student loans; some taxes; criminal fines and restitution obligations; and certain other long-term obligations that extend beyond the term of the plan, such as home mortgages (regular monthly payments), are not affected.
A chapter 7 bankruptcy discharges (eliminates) all unsecured debts. Unsecured debts include: credit card debt, personal loans, and medical bills. Certain debts, such as spousal and child support, student loans, some taxes, criminal fines and restitution obligations are not affected.
In a Chapter 13 proceeding, even if you are behind on mortgage payments, you may propose a budget plan that includes paying back any missed mortgage payments while making the current payments when due, and thereby not lose your home. If you are current on your mortgage payments, you will not lose your home as long as you continue to make payments when due.
In a Chapter 7 bankruptcy, if you are not behind on your mortgage payments, whether your house will be sold in a chapter 7 case depends on how much equity you have in the property. If you are behind on your mortgage payments, you might lose your home. The mortgage lender in such cases usually asks the bankruptcy court for permission to foreclose, in which case the home will be sold and the proceeds used to pay off the mortgage debt. If you are behind on your mortgage or have a large amount of equity and want to keep your home, a Chapter 13 bankruptcy may be more appropriate.
If you rent rather than own, and you are current in your rent payments, your landlord may not evict you for filing a bankruptcy. If you are behind, however, you could be evicted, especially if your lease ends.
A consumer credit report may include Chapter 7 and Chapter 13 bankruptcy information for 10 years from the time the case is filed. Most other credit information can be included in a consumer credit report for seven years.
Student loans guaranteed by the United States government are generally not discharged (eliminated) in bankruptcy. Only if you can demonstrate what is termed “undue hardship,” a difficult standard to meet, will the court discharge the loans.
Debtors have to continue making alimony and child support payments regardless of which chapter of bankruptcy they file under.
You must pay your projected disposable income toward the budget plan payments for the full length of the plan. Whether later changes in salary will change the payment plan depends on a complete consideration of all of the circumstances. The trustee may ask that your payments be adjusted if the increase is significant.
Secured debts are those where you have pledged collateral (e.g. house, car) to guarantee that you will make all payments. If you do not make payments on the debt when due, the creditor can take back the property that secures the debt, sell it, and apply the proceeds to pay off the debt. (If the sale price is not enough to cover the full amount owed, you may still be liable for the remainder.) Unsecured debts are debts not backed by collateral. For example, most credit card debt is unsecured debt (creditor cannot take back your groceries, clothes, or the gasoline in your car tank).
A chapter 7 bankruptcy eliminates most types of unsecured debt. Examples of unsecured debt are credit cards and medical bills. Individuals, married couples, corporations and partnerships can all file a Chapter 7 bankruptcy if eligible. There are limits on what debtors can own when they file a Chapter 7 bankruptcy. If your assets are above those limits, the trustee may sell the assets to pay your debts. See also Chapter 7.
Chapter 13 is a reorganization or repayment bankruptcy that allows you to enter into an interest-free debt repayment plan to pay back all or some of your debts over a 3 to 5 year period. The length of the plan will depend on your property, income and expenses. In most cases, you will not be required to pay unsecured debts in full. During this time, creditors must abide by the plan and are not permitted to collect from you or contact you.
To file under Chapter 13, you must have regular income, as you will be required to pay both your monthly living expenses and a monthly amount to the court toward your repayment budget plan.
Chapter 13 bankruptcy may prevent foreclosures and sheriff sales and stop repossessions and utility shutoffs while you catch up on your secured debt. See also Chapter 13.
After hiring my firm, you will be able to give my name and number to any future creditors who call. This will stop most creditor calls. Once the bankruptcy is filed with the court, creditors will no longer be permitted to contact you or your family members or friends.
Depending on whether you file a Chapter 7 or a Chapter 13 bankruptcy, there are ways for you to keep your vehicle. In a Chapter 7 bankruptcy you must be current with your car payments if you want to keep your vehicle. If you are not current when you file, you must be able to catch up on your payments, usually in a short amount of time.
If you are filing a Chapter 13 bankruptcy and you are current with your car payments, you can continue to make the same payment outside the bankruptcy plan. If you are behind on your car payments, you might include the back payments in your Chapter 13 repayment plan. Either way you will be able to keep you car.
Tax debts are generally dischargeable only if you file bankruptcy more than 3 years after you have filed a timely and accurate tax return. If your tax return had been filed late, the tax debt is generally dischargeable only if you file bankruptcy more than 2 years after filing an accurate return.
Yes, all of your creditors must be listed in your bankruptcy along with their names, addresses and account numbers. This is important so that all of your creditors can receive notice of the bankruptcy and, if you are repaying your creditors through a Chapter 13 bankruptcy, can get their share of the money that is being repaid. Not listing all of your creditors is in violation of the law (and may prevent discharging the debt owed to that creditor).
If you forgot to list a creditor, you should contact me as soon as you realize the creditor has been left out. Omitted creditors can often be added to the bankruptcy, however, I will advise you on how things will proceed.
If all or most of the debts you have are in your name only, your spouse may not have to file. However, your spouse’s income can have an impact on whether you can file a Chapter 7 or a Chapter 13 bankruptcy. Unless your spouse is legally listed as a co-debtor, creditors cannot come after your spouse for any money. Your spouse will still be liable for the full balance of any joint debt (debt that is in both of your names).
Although your Chapter 13 payments are due on the first of the month, there is no late fee associated with the payment and there is no consequence as long as the payment is received during the month it is due. If you default on your payments (2-3 months behind in this district) the Trustee may file a motion to dismiss your bankruptcy. If there was a reason for the default and a plan to cure the default you can file opposition to the motion and the Judge will normally allow the case to continue.
Our office will run credit reports, which although not perfect, are the most complete list of your creditors and account information. If a creditor’s name and address are listed on your petition they are included in the filing even if the account number is not complete.
Are you only able to pay the minimum monthly payments on your credit cards? Do your credit card balances keep growing? Are your wages being garnished or threatening to be garnished? Is your home near foreclosure or is your car about to be repossessed? Do you have medical bills that have put you so deep in debt? Call me so that I can help you determine whether filing bankruptcy is the best solution.
The only parties that will be notified of your bankruptcy are your creditors, the bankruptcy court and, in some cases, the Internal Revenue Service (IRS). Your employer is not notified of your bankruptcy unless it is a creditor in the bankruptcy.
If your financial problems are only temporary, you might simply ask creditors to accept lower payments or grant an extended payment schedule. Creditors may be open to these ideas if you otherwise had a good payment history or if they wish to avoid the inconvenience of a bankruptcy proceeding. Consumer credit counselors can also help creditors work out a repayment plan. Many counselors do not charge a fee for this service: you should be cautious about using an advisor who charges a fee.
If your financial problems are long-term or if your creditors will not informally agree to an alternative payment plan, bankruptcy may be the best way for you to get out from under your bills. Although it is not without its adverse consequences, bankruptcy can be the right option to help you make a fresh start.