How am I ever going to get out of all this debt????
You and millions of other Americans are asking this question every day and losing sleep over finding a solution.
is a legal process governed by the U.S. Bankruptcy Code which allows consumers and businesses to eliminate their debt. The person or company filing for Bankruptcy is called the Debtor. The person, company or bank to whom a debt is owed is called the Creditor. Personal bankruptcy is filed under Chapter 7 or Chapter 13 of the Bankruptcy Code.
bankruptcy is usually the preferred type of bankruptcy for most people who do not have much income or assets.
is more suitable for those who have an income higher than the median income as set by the IRS guidelines, who have equity in assets worth more than the allowed exemptions
or those who are behind on secured debts, such as their mortgage, and want to save their home from foreclosure. Both types of bankruptcies have restrictions and eligibility requirements. Your attorney should be able to determine which type of Bankruptcy you qualify for and offers you the most protection and the best relief. Bankruptcy is administered by a Trustee. The Trustee’s job is to make sure there are no fraud issues, to administer the bankruptcy case and make sure all schedules are filed accurately and to ascertain if there are assets that may be taken from the Debtor to sell (or liquidate) to pay off some of the debt the Debtor owes.
In Bankruptcy, there are three (3) different types of debt: Priority
debt and Unsecured
debt. Priority debt includes most recent IRS debt, child support and alimony.
includes a mortgage or car payment. Unsecured debt
is any debt that is not secured by any property such as most credit cards, medical bills or personal loans.
Priority debt is not dischargeable. Secured debt may be discharged if the Debtor chooses to surrender the property tied to the debt. Unsecured debt may be discharged notwithstanding any dischargeability issues in the Bankruptcy process.
Chapter 7 bankruptcy is often called liquidation bankruptcy as the Trustee may take from the Debtor any property that is not exempt to try to pay off some of the debt sought to be discharged. Certain property may not be taken from the Debtor as this property is protected by statutory exemption
rules. Exemptions vary from state to state and sometimes, federal exemption rules may apply. Our attorney would be able to determine which exemption rules apply in your particular case because there are jurisdictional issues that determine exemptions.
Chapter 7 is widely known to be generally quick and more attractive because it wipes away all unsecured debt right away. Usually, in the Southern District as of the date of this writing, a Debtor who files Chapter 7 bankruptcy and faces no objection or issues from the Trustee can expect to receive their discharge within 4 months of filing. Once the Debtor receives the discharge, the Debtor can be assured that he / she is no longer responsible for those debts listed in the petition , and the Debtor gets his/her fresh start at building a new financial future. It is important to contact your attorney if a creditor attempts to collect or even contacts you about a debt that has been discharged in Bankruptcy, as this Creditor may sued and sanctioned for violating the protection of the Bankruptcy rules.
Generally, to qualify for Chapter 7 bankruptcy, your household income should be under the median income for your household size, your expenses should be more than your income and you must not have filed and received a prior Chapter 7 discharge in the previous eight (8) years. If your income is higher than the median income, you may still qualify for Chapter 7 by passing the Means Test.
We will be able to account for all possible allowed expenses and deductions to help you pass the means test .
Chapter 13 bankruptcy is often referred to as “Reorganization” bankruptcy. Chapter 13 allows a debtor to repay some or all of their debt over a period of 3 – 5 years. Chapter 13 bankruptcy is a good option for several types of debtors.
Some debtors need to file Bankruptcy as a last resort to save their home. For Debtors who have fallen behind on their mortgage payments, Chapter 13 allows a Debtor to split their arrearage amount over the 3 - 5 year payment plan period.
Chapter 13 is an attractive option for most homeowners these days who have more than one mortgage. If your home is worth less than the total amount of your first mortgage, you may be able to strip the second or third lien. Certain restrictions apply and we can analyze your case for eligibility for stripping your second or third lien through bankruptcy.
Some debtors file Chapter 13 bankruptcy because their income is too high to qualify for Chapter 7.
There are other reasons that a debtor may choose Chapter 13 over Chapter 7. Our attorney can discuss with you the advantages and disadvantages of each type of bankruptcy in your particular case so that you make the best choice.