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Bankruptcy can help you eliminate your obligation to pay most or all of your unsecured debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start. Unsecured debt is debt that is not backed up by property (like a mortgage or a car loan). See Unsecured Debt
It can stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. See Chapter 13. Bankruptcy does not, however, normally eliminate mortgages and other liens on your property without payment.
You may prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed. Bankruptcy can stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt. Once a bankruptcy is filed, creditors may not take any action to collect a debt, or taking control of your property. If a creditor deliberately violates this stay, you may request that the Court stop them.
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of secured creditors. A secured creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
- Discharge certain types of debt, such as child support, alimony, certain other debts related to divorce, some student loans, court restitution orders, criminal fines, and most taxes and debts incurred to pay taxes.
- Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan. In a chapter 13 case, the creditor will be prevented from collecting on a consumer debt during the plan. See Chapter 13.
Call 1-800-863-2818 for more information.
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Chapter 7
Chapter 7 is called a “straight” bankruptcy. By filing a petition with the court and listing all your debts, assets, income and expenses, you are asking the Court to eliminate your obligation to pay most of your debts. This is called a discharge. Chapter 7 is also referred to as a liquidation because in return for a discharge, your assets that are not exempt will be liquidated (sold) and used to pay some of your debts. Most individuals do not have any assets which would be considered non-exempt. If you are concerned about your ability to keep certain property, you should speak with a professional. See What property can I keep? If you want to keep property like a home or a car and are behind on the payments, a chapter 7 case probably will not be the right choice for you because Chapter 7 does not eliminate the right of these creditors to take your property to cover your debt. Chapter 13 may eliminate this problem.
The filing fee for a chapter 7 case is $299.00. This fee may not be waived. Legal fees (which are in addition to the filing fee) depend on the type and amount of debts and assets.
Call 1-800-863-2818 for more information.
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Chapter 13
A chapter 13 case is a type of “reorganization” in which you file a "plan" showing how you will pay off some of your past-due and current debts over three to five years. You will normally make monthly payments to the Chapter 13 Trustee who pays that money out among your creditors.
Depending on your income, Chapter 13 can do several things chapter 7 can not do.
* If you have non-exempt assets but still need relief from your debts, you will be able to keep those assets if you pay their non-exempt value through your plan.
* If your home is in foreclosure (or you are significantly behind in mortgage payments) you can propose a plan to catch up on those payments and stay in your home.
* If you are behind in rental payments and are in danger of eviction, you may propose a plan to catch up on the rent and remain in your home.
* You may, in some cases be able to pay the value of secured property (like a car) rather than the actual debt, which is in many cases more than the value. You may also stretch the payments out to 60 months and reduce the monthly payment and the interest rate. This has the effect of lowering your monthly expenses, giving you more breathing room.
You will be required to pay a certain amount of your unsecured debt through the plan and how much you pay will depend on your budget.
You will need to have enough income (even if it is SSI or ANFC) in chapter 13 to pay your expenses and make the Chapter 13 plan payment each month.
The filing fee for a chapter 13 case is $274.00. This fee can not be waived, but in special circumstances, you may ask the court if you can pay this in installments. Our fee (in addition to the filing fee) depends on the type and amount of debt and assets, and the complexity of your plan.
Call 1-800-863-2818 for more information.
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