Summary
Description of Chapter 7
Erase Debt with a "Straight Bankruptcy"
A Chapter 7 bankruptcy will eliminate unsecured debts, such as credit
cards, utility bills, medical bills, personal loans and debts owed
on a repossessed car.
Debts not covered
A Chapter 7 will not eliminate secured debts, like car loans and
mortgages. If you want to keep your house or car, you must continue
to make those payments. A Chapter 7 will also not eliminate debts
such as student loans, recent tax bills, parking tickets, child
support, alimony payments, or accidents caused by drunk driving.
Those types of debts can only be dealt with through Chapter 13.
Student loans
The laws regarding the elimination of student loans changed in October
1998. The only way to get rid of student loans now is if you can
show extreme hardship.
Tax debts
Generally, tax debts are dischargeable only if the debt is over
three years old from the time it first became due.
Avoiding problems when filing Chapter 7
Because of the many nuances in Chapter 7 law, the specific terms
of any filing will only become clear once the facts of a particular
situation are known. However, if you are considering filing Chapter
7, there are a few things you should not do under any circumstances:
- Do not make any more charges or take any cash
advances on any of your credit cards.
- Do not make any property transfers.
- Do not pay off one of your credit cards. That
is called a "preference" and will make it more difficult
for you to get a discharge.
The filing process
Filing Chapter 7 is relatively easy. There are typically no court
appearances necessary. You need only to appear (with your attorney)
for a very informal meeting that takes place about five weeks
after your case is filed. This meeting is referred to as a Section
341 Meeting. The purpose of this meeting is for a court-appointed
trustee to ask you a few very brief questions to determine whether
you have any non-exempt assets. Your creditors are given notice
of this meeting and are permitted to question you, but usually
they are not present. The meeting generally takes less than five
minutes. After the meeting, all you have to do is wait about two-and-a-half
months for your discharge papers to arrive in the mail.
Summary Description of
Chapter 13
Reorganize Your Bills
Chapter 13 is often referred to as a court-ordered debt consolidation.
Chapter 13 will stop a pending foreclosure or car repossession.
It will stop a wage assignment or wage garnishment. It will even
prevent the IRS from taking any tax refunds that you are entitled
to. In short, a Chapter 13 will allow you some breathing room
so you can reorganize your finances.
Reorganizing your debts
When you file a Chapter 13, you are essentially consolidating
all of your debts into one large debt. Payments are made either
once a month by you to a court-appointed trustee, or are deducted
automatically from your paycheck, whichever you prefer. The trustee
will then distribute your money among all of your creditors according
to a plan that we will help you formulate.
In a Chapter 13 you only have to pay back what you can afford.
This determination is based on your income, your living expenses,
the amount of your debt, your assets and types of debt you have.
Chapter 13 can help you deal with recent student loans, recent
tax debts, parking tickets and other debts that cannot be discharged
in a Chapter 7.
The filing process
Filing Chapter 13 is very simple. After your case is filed with
the court, you will go with your attorney to the office of the
trustee. This meeting takes place about six weeks after your case
is filed and is very informal. The purpose of the meeting is for
a trustee to go over your case to make sure the plan that we have
filed on your behalf is workable. Assuming that the trustee recommends
your plan-and he/she almost always does-your case will be set
for confirmation in front of a judge. You do not need to be present
in court for your confirmation hearing-we will be there for you.
Then, all you need to do a make your monthly payment to your trustee.
If you prefer, we can arrange for your payment to be automatically
deducted from your paycheck.
Duration of Chapter 13
The typical Chapter 13 plan will last between three and five years.
If your financial situation improves during that time, you may
choose to pay off your Chapter 13 plan in a shorter amount of
time without penalty.
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