If you are facing serious financial problems, bankruptcy can be a powerful financial tool. It can get rid of a lot of your debt and really put your financial life back on track.
For instance, bankruptcy can do the following:
- Eliminate credit card and other unsecured debt, such as personal loans.
- Stop aggressive creditors from contacting you.
- Stop a foreclosure.
- Stop a utility shut off
The Automatic Stay
When a bankruptcy petition is filed with the court, something called the “automatic stay” goes into effect. The automatic stay is like a door slamming shut on your creditors. Once it is in place, your creditors cannot attempt to collect a debt in any way. That means no more harassing phone calls and no more nasty collection letters. If you have been sued by a creditor, the automatic stay will stop the lawsuit. Not only that, but if you have a judgment against you, and the creditor is trying to enforce the judgment (either on your property or bank account), the automatic stay will stop the creditor from enforcing that judgment.
There are two main bankruptcies available to individuals:
Chapter 7:
Chapter 7 bankruptcy is known as the “fresh start” or “straight” bankruptcy. When you think of bankruptcy, this is probably what you are thinking of. It is the most popular bankruptcy, and generally it is quick and relatively easy to navigate.
Most people who file for Chapter 7 can keep all their possessions, including their car, their home, and their retirement accounts (such as a 401(k) or IRA). Bankruptcy law allows you to keep certain property, and a good bankruptcy lawyer will guide you and apply the law to your specific circumstances. That way you can maximize the amount of property you can keep and still greatly benefit from the bankruptcy.
Most Chapter 7 bankruptcies have only one hearing. The hearing takes place some thirty to forty-five days into the case. This hearing is not even in a courtroom and it is not in front of a judge. A Trustee conducts the hearing and it should not even last very long. If you have an attorney, he or she will accompany you and sit beside you during the hearing.
There are some qualifications to determine if you qualify for Chapter 7. A good bankruptcy lawyer will know these qualifications and determine if you qualify. You should consider Chapter 7 if you are too deep in debt and there is no way you can pay off your debts, or even keep up with the minimum payments.
Chapter 7 is not for everyone – for instance Chapter 7 may not be appropriate if you are behind on your mortgage and want to save your house, or if you have extensive tax debts. Student Loans are not dischargeable in bankruptcy.
Chapter 13:
Chapter 13 bankruptcy is quite a bit different than Chapter 7 bankruptcy. However, it still has the general benefits of bankruptcy. Like Chapter 7 bankruptcy, when the bankruptcy petition is filed with the court, the automatic stay goes into effect.
In our area, when people fall on hard times they may also fall behind on their mortgage. In this situation, Chapter 13 can be used to catch up on the mortgage arrears and fend off foreclosure. In fact, the main reason to file Chapter 13 is to save a home. There are other reasons to file Chapter 13. For instance, Chapter 13 is a useful tool to pay off tax debts, whether it be the IRS, the PA Department of Revenue, or any local taxing authority.
In short, Chapter 13 is best described as a household reorganization. The chapter 13 debtor is paying money to his or her creditors monthly. There is a “Plan” of reorganization that must be confirmed by the Chapter 13 Trustee. That Plan can last anywhere from three to five years. The amount paid back in the Plan depends upon the nature of the debt, how much debt there is, and the income of the debtors who filed the Chapter 13. A good bankruptcy lawyer, well versed in the intricacies of Chapter 13, can guide you and educate you in this process.
Much like Chapter 7, you should only have to attend one hearing. The hearing takes place some thirty to forty-five days into the case. This hearing is not even in a courtroom and it is not in front of a judge. In fact, the Chapter 13 hearings in our area take place at a local hotel. A Trustee conducts the hearing and it should not last very long. If you have an attorney, he or she will accompany you and sit beside you during the hearing.
What Can you Do?
If you find yourself too deep in debt, and cannot possibly pay your bills, I can help. If you are facing a foreclosure, utility shut off, or lawsuit, I can help. Please call my office at (814) 240-1013; (4120 229-2107 or email me at richarda@johnstownbankruptcy.com with your questions. The first office consultation is free and payment plans are accepted.
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