Understanding Bankruptcy
Chapter 7 / Chapter 13 Bankruptcy
Filing bankruptcy allows you to start anew. Jacqueline Grasso has compiled a list of common questions and answers about bankruptcy.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most frequently filed bankruptcy. This is for people who, even under ideal circumstances, are unable to repay their debt. Often, people filing for this bankruptcy category do not have to repay any of their debts.
This type is the better option if you have suffered long-term unemployment or other loss of income. You can also file for this bankruptcy if you have an unmanageable credit card or payday loan debt. People filing for Chapter 7 Bankruptcy do not have to pay a majority of their debts, including credit cards, personal loans, medical bills, utility bills, payday loans, repossessions, etc. Chapter 7 is an option for those who’ve suffered loss of income, unemployment, medical expenses and other financial hardship. A typical Chapter 7 takes approximately four months to complete.
What is a chapter 13 Bankruptcy?
A Chapter 13 Bankruptcy is often filed by those with disposable income who don’t qualify for a Chapter 7. A three or five year debt repayment plan is required and often the amount of debt paid is significantly less that the total amount owed. A Chapter 13 is also filed by those seeking to pay mortgage arrearages under a proposed repayment plan over the course of three to five years.
Do I File a Chapter 7 or Chapter 13 Bankruptcy?
There are several situations where Chapter 13 is preferable to a Chapter 7 Bankruptcy:
- A Chapter 13 bankruptcy allows people to make-up overdue mortgage payments over time, thus saving their home from foreclosure.
- Chapter 13 bankruptcy can remove a second mortgage from a home.
- Chapter 13 can reduce the amount owed on a multi-family home, an investment house or a car loan.
- A Chapter 13 bankruptcy comes off your credit report three years faster than a Chapter 7 bankruptcy.
What Happens Once I File for Bankruptcy?
Creditors are immediately notified of your filing and they are prohibited from all forms of communication. The law requires creditors to cease all collection efforts, including court litigation, wage garnishments, foreclosures and repossessions. You should continue to pay your automobile loans and mortgages if you intend to retain those assets. Always continue paying daily living expenses.
Within 30 to 40 days of filing, you’re required to attend a hearing called the “Meeting of Creditors”. This is an informal hearing conducted by a bankruptcy trustee. Within 60 days from the Meeting of Creditors, the court issues a formal discharge, which legally releases you from payment of most debts. Certain debts are non-dischargeable (child support, alimony, some income and property taxes and student loans).
Creditors can go to this meeting and ask you questions. However, it is quite uncommon for them to attend such hearings. Examinations are usually short affairs lasting only several minutes. During which, the trustee will ask you several questions.
What Happens to My Property?
Your home, retirement funds, household goods, clothing, tools for work and other possessions are protected by state and federal law. Call Jacqueline Grasso to ensure protection of your assets.