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  What Is bankruptcy?

Bankruptcy is a legal right that helps millions of people.  Chapter 7 bankruptcy gives filers a fresh start by discharging and eliminating unsecured, non-priority debt that filers can no longer afford to pay such as credit cards, medical bills, payday loans, repossession and foreclosure deficiencies, etc.  Chapter 13 bankruptcy allows filers to file bankruptcy who do not qualify for Ch. 7 bankruptcy due to having higher income or non-exempt assets. Ch. 13 is often referred to as a “repayment plan” because filers pay an affordable percentage of their total debt to unsecured creditors over the course of 3-5 years.  Any remaining balances on unsecured, non-priority debts are discharged at the end of the Ch. 13 plan.  Some clients who qualify to file Ch. 7 bankruptcy choose to file Ch. 13 to remove 2nd or 3rd mortgages, get caught up on mortgage payments, and/or modify car payments allowing filers to keep their home and vehicles.

What are the benefits of bankruptcy?

Bankruptcy is instant relief unlike debt consolidation which has a very low success rate and often ends in bankruptcy after years of trying to repay debt with little or no progress.

Bankruptcy stops repossession.  Filing bankruptcy protects your vehicle during the automatic stay period.  It is sometimes possible to re-write a car loan through a Ch. 13 plan or to redeem or replace a vehicle within a Ch. 7.  The re-writing, redemption, or replacement process may reduce the monthly payment by reducing the principal balance, interest, or both.

Bankruptcy stops wage garnishments, prevents new garnishments while in bankruptcy, and prevents garnishments in the future on discharged debts.

Bankruptcy stops foreclosure.  Filing bankruptcy protects your home during the automatic stay period.  It is possible to get mortgage payments caught up through a Ch. 13 plan or to remove 2nd or 3rd mortgages making payments more affordable in the future.

Bankruptcy stops utility disconnections during the automatic stay period, and back balances may be discharged.

Medical bills are dischargeable in bankruptcy and are often a common reason for filing bankruptcy.

Income taxes that are more than 3 years old may be discharged.

Bankruptcy stops all collection efforts.  Creditors are notified of your bankruptcy status by the court.  Under federal law, creditors must stop all collection efforts.  If contacted by a creditor once your case has been filed, you should refer the creditor to our office.  Although rare, if collection efforts persist, you may bring a contempt action against the creditor and receive compensation.

Can you relieve my concerns about bankruptcy?

Bankruptcy is affordable!  With the huge amount of money that will be saved on repaying debt and avoiding high-interest, bankruptcy usually pays for itself over and over again. Once you have made the decision to file, coming up with filing fees can be simple once we have advised you which payments you should immediately stop paying.  The money allocated toward payments that no longer need paid can go toward the cost of getting your bankruptcy filed.  If you have already stopped paying creditors prior to seeking help, there are other ideas for paying bankruptcy costs that can be discussed.

Federal Law prohibits employers from discriminating against employees for filing bankruptcy.

Bankruptcy is a matter of public record; however, unless someone is informed by you or given other reason to know, few individuals go to the trouble of researching the large amount of bankruptcy records.

Many Ch. 7 filers have concerns with whether property will be liquidated if filing a Ch. 7 Bankruptcy.  Most filers don’t lose anything.  Filers only lose the assets that are not encumbered by liens and that cannot be protected with exemptions.  For example, if joint filers own a home worth $100,000.00, and there is a mortgage on the property in the amount of $56,000, the filer has equity in the amount of $44,000.  This equity will not be a problem in the bankruptcy because each debtor is entitled to a homestead exemption which will be applied to the equity and exempt the asset from being liquidated.  There are many more exemptions such as this and all apply to both individual and joint filers.

Bankruptcy law does not require a spouse to file.  A filer may file a Ch. 7 or Ch. 13 bankruptcy without their spouse filing; however, sometimes it is best for the spouse to file.

How Unexpected Expenses and Life Changes Are Handled In A Chapter 13

A Ch. 13 plan allows for unexpected expenses such as car and home repairs, medical expenses, etc.  Life changes may occur during the course of a Ch. 13 repayment plan which may cause feasibility issues with making your Ch. 13 payment.   If you cannot make your Ch. 13 payment due to unemployment, the court may allow suspension of payments for a short period of time or allow conversion to Ch. 7 for longer periods of unemployment.  It is important that this office be notified immediately if such a circumstance should arise.

How do I rebuild my credit after bankruptcy?

Bankruptcy remains on credit reports for seven to ten years; however, most of the time, credit can be obtained much sooner.  Many clients receive auto loan and credit card offers shortly after receiving their bankruptcy discharge.  Filers have obtained mortgages in as little as 2 -3 years post-bankruptcy discharge.

Credit scores which have been lowered by bad debt usually cannot go up until some debt is eliminated.  If you are currently unable to pay your debt, bankruptcy may actually improve your credit score.  If you are current on debt payments but are not able to continue to keep up, your score may initially go down as a result of your bankruptcy. However, your score will be taking a plunge as soon as bills become past due.  By eliminating your debt and making wise credit choices in the future, your score can go back up.  If you choose to do nothing about debt problems, no progress will be made towards improving your credit score or your life.
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