Types of Bankruptcy
Chapter 7 Bankruptcy
Chapter 7 type bankruptcy has many names. It is sometimes referred to as “straight bankruptcy.” This is the type most people think of when they think of bankruptcy. It is the most common type of bankruptcy. It is designed to help people get a fresh start, to start over, to give individual consumers and families a chance for a new beginning financially. The beautiful thing about Chapter 7 is that it wipes out your “unsecured” debts, that is, it wipes out your obligation to pay certain types of debts, like credit cards and medical bills. Filing a Chapter 7 immediately stops all collection activities against you. It stops all creditors from bothering you or suing you.
Certain types of debts are not wiped out however. Student loans, some taxes, and parking tickets, will survive a Chapter 7 bankruptcy.
Another name for Chapter 7 is Liquidation. That is because when you file Chapter 7 the Court-appointed Trustee temporarily owns all of your property. And, if you own too much property, the Trustee can liquidate or sell the property to raise money for your creditors. However, if you are properly represented by an experienced attorney, you can in most cases, keep all of your property. This does vary with the facts of each case, but an experienced bankruptcy lawyer can protect your property using one of the chapters of the bankruptcy laws.
We use Chapter 7 bankruptcy when we have a client with a great deal of unsecured debts, like credit card debts and medical bills, and when they don’t earn too much money or own too much property. If an individual earns more than a certain amount, as set out in certain census bureau statistics, the Court may require that they file a Chapter 13 type bankruptcy (a repayment plan) rather than a Chapter 7 because the Court and Congress feel that they can afford to pay back at least a percentage of what they owe creditors.
Or, if they own a great deal of property, like a home with a great deal of equity, the Court will likely feel that you should pay back a certain percentage of your debts. That percentage will depend upon what you earn, the size of your family, and the amount of nonexempt property that you own, among other factors.
As you can see, this is complicated and I urge you to only go to experienced bankruptcy lawyers who regularly practice in the U.S. Bankruptcy Courts to seek counsel for your current financial situation.
To determine which type of bankruptcy is most appropriate for you requires an involved investigation into your financial affairs, including your income (now and over the last several years), the members of your household and the property you own now and have owned over the last 10 years. The new bankruptcy laws have made this even more complicated so I urge you to only seek counsel from attorneys concentrating in the practice of bankruptcy law.
Any bankruptcy filing will stop creditor harassment and stop collection activities, but you must be sure you are filing under the correct chapter and that all your options have been explained to you.
Chapter 13 Bankruptcy- The Repayment Plan
Chapter 13 bankruptcy is a court-supervised repayment plan, a consolidation of your debts into one payment, paid to the Court-appointed Trustee. The Court has the power to force your creditors into one affordable payment. You pay the Trustee, and then each month, the Trustee distributes the money to your creditors according to the Chapter 13 plan approved by the Court and created by your attorney.
Chapter 13 is designed to help people save their home and car and to stop foreclosures or repossessions. It is designed to pay back your creditors over time, to pay off the debts you cannot wipe out in a Chapter 7, such as student loans, taxes, past-due mortgage payments, or parking tickets. Chapter 13 can also be used to protect a cosigner from creditor harassment.
We can consolidate all of your debts (including credit card balances) and often you will not have to pay interest or even pay back the debts in full. This can save you much money.
Filing a Chapter 13 case will stop a foreclosure in the State of Colorado as long as you file the Chapter 13 before the foreclosure sale.
Filing a Chapter 13 can stop the repo man from taking your car and, in some instances, can be utilized to get the car back after it has been repossessed (for example, if you need the car to get to work).
Chapter 13 Repayment Plans typically run for three to five years, depending upon many factors, including your income, living expenses, the number of people in your household, the type of debts you have, and the amounts you owe.
The new Federal Bankruptcy Laws are complicated, and that is why I urge you to consider hiring an experienced attorney only. There are many ways an attorney can manipulate the new Bankruptcy Laws to work for you. You should consult only with an experienced bankruptcy attorney whose practice concentrates in bankruptcy law, before you make any decisions regarding your financial problems.
To determine which type of bankruptcy is most appropriate for you requires an involved investigation into your financial affairs, including your income (now and over the last several years), the members of your household, and the property you own now and have owned over the last 10 years. The new bankruptcy laws have made this even more complicated so I urge you to only seek counsel from attorneys concentrating in the practice of bankruptcy law. The new laws have many new rules and deadlines that are not known to the general practitioner.
Any bankruptcy filing will stop creditor harassment and collection activities, but you must be sure you are filing under the correct chapter, that all your options have been explained to you, and that your attorney has reviewed your case in sufficient detail to provide you with all of your options.