Bankruptcy Basics – What You Need to Know

Understanding Bankruptcy

There are Different Types of Bankruptcies.

Chapter 7 Bankruptcy

When most people think of bankruptcy, they are usually thinking of a Chapter 7 bankruptcy. Chapter 7 is the most common form of bankruptcy in the United States.

In a Chapter 7 bankruptcy, the individual is allowed to keep certain exempt property. Most liens, however (such as real estate mortgages and security interests for car loans), survive, unless you choose to surrender the property. The amount of property that can be claimed as exempt varies from state to state. Non-exempt assets, if any, are sold by the trustee to repay creditors. Many types of unsecured debt are legally discharged by the bankruptcy proceeding.

Chapter 7 allows you to eliminate unsecured debt such as:
• Credit cards
• Medical bills
• Unsecured loans
• Personal loans
• Older tax debt may be dischargeable
• Debts from a vehicle repossession
• Home equity lines of credit (HELOC), if your home was foreclosed or surrendered

There are various types of debt that are not discharged in a Chapter 7 Bankruptcy. Common examples of non-dischargeable debt include:
• Child support
• Income taxes less than 3 years old and property taxes
• Student loans (very rare exceptions)
• Fines and restitution imposed by a court for any crimes committed by the debtor
• Spousal support
• Property settlements through divorce
Despite their potential non-dischargeability, all debts must be listed on bankruptcy schedules.

A Chapter 7 bankruptcy remains on an individual’s credit report for 10 years from the date of filing. This can make credit less available and terms less favorable, although high debt or delinquent debt can have the same effect. Future ability to obtain credit is dependent on multiple factors.

BENEFITS OF FILING FOR CHAPTER 7 BANKRUPTCY

Chapter 7 bankruptcy is a good option for debtors who need a fresh start financially. Chapter 7 will stop wage garnishments, bank levies, and lawsuits filed by creditors. Many assets, such as bank accounts, vehicles, equity in your home, and jewelry are protected under Chapter 7 bankruptcy. Once your Chapter 7 bankruptcy is completed you can begin rebuilding your credit. If you do nothing, your credit rating will continue showing late payments and balances owed.

FILING FOR CHAPTER 7 BANKRUPTCY

Filing for Chapter 7 bankruptcy is often the quickest way out of debt and the quickest way to rebuild credit. Once we have met with you and discussed your options, we will prepare the paperwork for filing, complete the Means Test and determine the best time to file.

You will need to be prepared to provide the following documents in order for us to prepare your case:
• A copy of your most recent filed tax return
• If you are working, copies of your paystubs for the last 6 months
• Copy of your valid picture ID (driver’s license)
• Copy of your SS card or other form of SS number verification
• Also, you will be required to take a credit counseling course (online or by telephone) before your case is filed and a Financial Management course after your case is filed. Our office provides clients with the information to complete these courses at the appropriate times.

Once your Chapter 7 bankruptcy is filed, the court immediately issues an order called an “automatic stay.” At that time, your creditors are prevented from taking any further steps to collect the debt. This bankruptcy order is often the relief most people need just to start putting their finances back in order.

Approximately 45 days after filing your case, you are required to attend a creditor meeting with your attorney. There is no judge present, but a trustee is assigned to your case and verifies the information in your bankruptcy petition. At the end of your case, you will receive an Order of Discharge issued by a Federal Bankruptcy Court. This court order prevents creditors from taking any further action to enforce collections against you.

Learn more about the protection Chapter 7 bankruptcy offers. Contact us today your free initial consultation.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, our office works closely with our clients to reorganize their debt and prepare a manageable payment plan. A Chapter 13 bankruptcy process takes longer than Chapter 7 bankruptcy.

However, it allows clients several other benefits not available in a Chapter 7, such as:
• The ability to protect additional assets.
• Remove second and third mortgages.
• Stop a foreclosure.
• Set up payments to pay arrearages.
• Repay non-dischargeable IRS/FTB taxes, without interest.

FILING FOR CHAPTER 13 BANKRUPTCY

Under Chapter 13 bankruptcy, clients work with their attorney to create a repayment plan for their debt. The Chapter 13 Plan is based on monthly income and expenses. The repayment plan is submitted to the court, and there is a meeting with the bankruptcy trustee assigned to your case. Once the payment plan is approved by the court, clients make payments for 3-5 years. Any remaining unsecured debt goes away and is discharged at the end of the payment plan.

BENEFITS OF CHAPTER 13 BANKRUPTCY

Filing for Chapter 13 bankruptcy helps clients eliminate second and third mortgages, and also may reduce vehicle loans to present day value. You do not need to give up any personal property. Bankruptcy will stop collection calls, lawsuits, foreclosures, wage garnishments and repossessions. Bankruptcy can discharge unsecured debts like credit cards and medical bills, and generally clients are able to retain their vehicles, personal possessions and homes.

There is no reason to feel embarrassed or guilty about filing bankruptcy. Many successful people and companies have filed for bankruptcy. Our office is a judgment free zone. Our goal is to help you get relief from your debts and be able to move forward in life debt free.

The Law Offices of Steven A. Wolvek has been helping clients file for Bankruptcy for over 25 years. When clients contact our firm for assistance, we work closely with them to explain their options and help them through the bankruptcy process. You will receive prompt, personal service and we strive to help our clients feel less stressed about their financial situation.