- What is Chapter 7 Bankruptcy?
- What is Chapter 13 Bankruptcy?
- Will my creditors stop harassing me after I file?
- Will I lose my assets when I file?
- Will I have to go to court?
- Can I protect my house in bankruptcy?
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy eliminates most types of debt and provides you with a fresh start. Although Congress recently amended the bankruptcy laws to make it tougher to qualify for this type of relief, most debtors contemplating bankruptcy are still able to get a fresh start by filing a chapter 7.
Upon filing a chapter 7, your creditors will receive notice of your case and immediately cease all collections activities. A bankruptcy trustee is assigned to your case to determine whether any of your assets are subject to liquidation. You will be required to attend one hearing with the Trustee to answer questions under oath. Two months after the hearing, the judge enters an order discharging all debts that are dischargeable and closes your case. The main types of debts that are not eliminated in a chapter 7 bankruptcy are student loans, government fines, domestic support obligations and some taxes.
Chapter 13 reorganization bankruptcy is a court monitored repayment plan. Filing a chapter 13 immediately stops creditors and allows you to propose reasonable repayment terms that often result in eliminating most or all of your debts, while allowing you to keep your possessions, including your home and vehicles. Chapter 13 is typically filed as an alternative to a chapter 7 fresh start bankruptcy where the debtor does not qualify for chapter 7, or where the debtor wishes to protect assets that could be liquidated in a chapter 7 case.
A Chapter 13 repayment plan usually runs 3 to 5 years, and can also be used to allow you to repay arrears on your home mortgage over time, while stopping an impending foreclosure.
Chapter 13 cases have always been complicated and require the assistance of an experienced attorney.
Yes. As soon as your petition is filed with the bankruptcy court under either chapter 7 or chapter 13 of the bankruptcy code, you are automatically protected by a “stay” of almost all forms of debt collection, including creditor calls, letters, lawsuits, garnishments, repossessions and foreclosures. Certain legal actions, such as collection of current domestic support obligations or determination of child custody, are not covered by the automatic stay.
Many forms of assets are protected by state and/or federal exemption laws. Exemptions are simply laws that protect a certain amount of value of different categories of assets from creditors. Exemptions vary widely depending on whether you have lived in other states within the three year period before filing your case. To know whether any of yourr property will be at risk upon filing, it is important that you consult with an attorney.
In order to complete either a chapter 7 or chapter 13 bankruptcy, you will be required to attend a short hearing called a “Meeting of the Creditors”, which is held about one month after filing. This hearing is not held before the court, rather, it is presided over by a bankruptcy “Trustee” – an official appointed to oversee your case. In most cases, this hearing is rather short, and the Trustee will ask questions related to the petition and schedules you will have filed with the court. If you are represented by a competent attorney, your attorney will have carefully reviewed the same issues the Trustee is looking for before the case is filed, and your attorney should be able to predict with some certainty the outcome of the hearing. Your attorney will also represent you at the hearing.
The outcome of the hearing depends on the facts in your case. In other words, whether a Trustee will find that your property can be liquidated depends on the type of property, its value and the available exemptions. Because it is not always a straightforward process and the stakes are high, you should always consult with an attorney before entering into this process.
Most homeowners contemplating bankruptcy are concerned with whether they will be able to keep their homes. Depending on the value of your home and how much you owe against it, you may be able to protect the equity, keep the house and discharge other debts. If this issue concerns you, it is crucial that you seek advice from a competent attorney to determine whether you can protect your home in bankruptcy.