Detailed Information on Chapter 7 and Chapter 13 Bankruptcy
Every year hundreds of thousands of persons and businesses find in necessary to file for bankruptcy protection. Frequently, these filings are caused by layoffs or slowdowns in employment, business failures, divorces or serious medical problems. These calamities are often accompanied by lawsuits and collection efforts including garnishments or seizures. Filing for bankruptcy protection automatically stops any ongoing lawsuits or collection efforts. You are then able to eliminate some of your debt or reorganize it in such a way as to fit within your budget. Filings for individuals are normally done under Chapter 7 or Chapter 13 of the United States Bankruptcy Code as described below.
A chapter 13, or debtor’s plan resembles a debt consolidation loan but is handled through the Bankruptcy Court. It allows you to pay for property that you wish to keep, and possibly a portion of your other debts, according to your ability to pay. These payments are made over a period of three to five years, and you are protected from your creditors by the bankruptcy court during this entire time. Your plan payments will include most of your attorneys fees, court costs and the administrative costs of the plan. If you complete your plan, all of your debts are discharged, meaning you do not have to pay them, even though they may not have been paid in full.
A chapter 13 plan is useful for persons who may have gotten behind in their home mortgage payments and are unable to bring them current. Those payments which are in arrears may be placed in the plan and the mortgage default thus cured, even immediately before a foreclosure. You then resume normal payments to the mortgage company beginning with the next one due.
Chapter 13 plans also allow you to pay for personal property which you wish to keep, possibly at its value. And by spreading all of these amounts out over three to five years, your monthly payment is usually less than the total of the payments you were attempting to make before you filed. In addition, certain debts which may not be dischargeable in either type of bankruptcy, such as some taxes and student loans, may be paid in full through your payments. During an initial consultation with your attorney, an estimated payment amount can be determined according to the information available at that time.
A chapter 7 bankruptcy, sometimes called a straight or liquidation bankruptcy, is a method of simply discharging debts. All of your debts are listed in your petition and they will be discharged, with a few exceptions. For those debts for which real estate or personal property which you wish to keep serves as collateral, you may usually agree with the creditor to continue paying that debt and keep the item of collateral. There are certain limitations on the values of real estate and personal property which you may keep which you should discuss with your attorney.
For those persons who are not behind in payments for items they wish to keep, or who can bring the debt current themselves within a reasonable amount of time after filing, the chapter 7 bankruptcy provides a more economical and quicker means of handling their debt problem. One is normally discharged of eligible debts within ninety days of filing.
No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.
We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code.
Jack B. Sabatini
Attorney at Law 108 South Side Square Huntsville, AL 35801