Find Relief From Debt
If you are behind on your payments or suffering the weight of burdensome debts, Chapter 7 or Chapter 13 bankruptcy might help you find a path to a brighter financial future.
Bankruptcy is a legal process designed to give people a fresh start through debt relief. For consumers, there are two types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
In a Chapter 7 bankruptcy, the debtor’s property is liquidated. The proceeds from the liquidation are then used to pay the debtor’s creditors. In a Chapter 13, by contrast, the debtor follows a repayment plan to repay his or her creditors.
In both situations, the debtor is typically is released from personal liability for most of his or her debts after the filing process is completed.
What Exactly Is Bankruptcy?
Bankruptcy is a federal court procedure designed to helps consumers find relief from their debt and pay their creditors. In broad terms, bankruptcy can be categorized as either a liquidation or a reorganization. In consumer cases, Chapter 7 bankruptcies are typically categorized as a liquidation, where property is sold in order to repay debts. Chapter 13 bankruptcies, on the other hand, are categorized as reorganization. Reorganization usually means that the debtor will be able to keep his or her property, but they must commit to a repayment plan over the course of three to five years.
Many debtors find relief in the bankruptcy process from their creditors. If you can prove that you are entitled to creditor protection, the bankruptcy court will provide that protection during the bankruptcy proceeding.
Is Chapter 7 Bankruptcy Right For Me?
In a Chapter 7 bankruptcy proceeding, some of your property may be seized by the court and sold to repay some or all of your debts. However, one benefit of filing Chapter 7 bankruptcy is that any unsecured debts, or debts not secured with some form of collateral, will be completely discharged. Furthermore, there are certain types of personal property, such as clothes, furniture and your home, that cannot be sold off to repay your unsecured debts.
Secured debts, however, are treated differently. The individual filing for Chapter 7 bankruptcy has a choice to allow his or her creditor repossess the property that secures the debt, continue to make payments or pay the creditor an amount of money to replace the value of the property.
Consumers who want to file for Chapter 7 bankruptcy must first prove they are eligible to file for Chapter 7. For example, to be eligible for Chapter 7 bankruptcy, the filer cannot make enough money to be able to fund a Chapter 13 bankruptcy repayment plan.
Although Chapter 7 can help consumers discharge burdensome debt, there are some types of debt that cannot be discharged. Child support, taxes and alimony payments, for example, are types of debt that cannot be eliminated through Chapter 7.
Should I Consider Chapter 13 Bankruptcy?
If you have a reliable source of income, Chapter 13 bankruptcy may be an appropriate alternative to Chapter 7 bankruptcy.
In Chapter 13 bankruptcy, consumers work with the court to create a repayment plan. Once the repayment plan has been created, the filer must commit to repaying his or her debts according to the plan for three to five years.
The amount that the filer will need to pay over that time period is based upon their income level, how much debt they have, and the value that creditors of unsecured loans would have received if the debtor had had filed under Chapter 7 instead of Chapter 13.
To be eligible to file for Chapter 13 bankruptcy, the debtor must be able to prove that their debt is under the limits for filing. As of 2009, for example, the limit on secured debt was $1,010,650 and the limit on unsecured debt was $336,900. If debts exceed either of those amounts, the debtor may not be eligible for Chapter 13 bankruptcy.
One addition benefit of Chapter 13 bankruptcy is that debtors may be allowed to repay secured debts without having their property repossessed. Similar to unsecured debts, debtors may be able to put past due payments into the debt repayment plan, and pay them off over a period of years.
What Are My Next Steps?
If you are considering filing for bankruptcy, you need to speak with a bankruptcy attorney. Contact our office today to speak with our attorneys David Mills and Patty Mallory. Together, we will discuss your options and identify a clear path forward.