Bankruptcy – Chapter 7 and Chapter 13

Bankruptcy is a right provided by law designed to give people who are deeply in debt a fresh start.  Bankruptcy will discharge many of your debts, which means that you will no longer be responsible for repaying them.  However, you may have to repay secured debts for the purchase of particular merchandise or debts on which you gave a mortgage or put up other property as collateral.

The law allows you to keep some money and most types of necessary property in bankruptcy.  To ensure that the property exempted by law is protected, it is important that you list all property items, whether real or personal.  Any item that is not listed will not be protected in bankruptcy.  You must also list everyone to whom you owe money.  If you leave out any of your creditors, you may have to repay the creditor or you may lose your right to bankruptcy.  It may also be considered a crime if you intentionally give false information or leave out information.

There are two main types of bankruptcy that people file: Chapter 7 and Chapter 13.

Erasing Your Debts in Chapter 7 Bankruptcy

Chapter 7 is a total liquidation bankruptcy.  Essentially, if you earn less than the median income for your area, you can file for Chapter 7.  You must disclose all of your assets, most of which are considered “exempt” and that you get to keep.  The exemptions under the bankruptcy laws allow you to keep your car, clothing, household goods, and up to $125,000 equity in your home while discharging your debt. Chapter 7 bankruptcy is the type of personal bankruptcy that will stop all collection action immediately, including foreclosures.  If you have been sued or there is a judgment against you, these matters are often taken care of in a bankruptcy filing.  In some cases, even taxes are dischargeable.  We will help you determine if your tax debt may be dischargeable.

Not everyone is eligible for Chapter 7 bankruptcy. I can help you determine whether you qualify. Also, Chapter 7 is not right for everyone.  Some debts, such as taxes, student loans, and child support obligations cannot be erased in most Chapter 7 bankruptcies.  If you want to keep certain property — like a home or vehicle — any mortgages or other loans connected to that property must continue to be paid.

Once you decide to file Chapter 7 bankruptcy, we will begin the process immediately to stop creditor harassment and lender threats. If you are currently having your wages garnished, do not delay in contacting us.  Filing Chapter 7 bankruptcy will stop the garnishment immediately.

Approximately 1 month after filing you will attend a Meeting of Creditors at which you will give testimony to the Trustee about your assets and income.  The majority of the time, the Trustee makes a finding of “no assets” and asks the court for an order granting you a discharge from all of your debts.  The discharge is usually granted within 3 months and your bankruptcy is behind you.

Getting You on a Reasonable Payment Plan With Chapter 13 Bankruptcy

Under Chapter 13, you submit a payment plan to repay some or all of your debts over a three- to five-year period. If the plan is approved by the bankruptcy court, creditors may not harass you. If you successfully complete the payment plan, your remaining debts — if eligible for discharge — will be erased.

Chapter 13 bankruptcy allows for reorganization of debt. If you own a home and are in arrears on the house payments, for example, or have too much equity in the house, Chapter 13 may be right for you. If your income is too great or your assets are too valuable you may still be eligible for a Chapter 13 bankruptcy though you may not wish to file Chapter 7.

Each bankruptcy chapter has its own benefits and pitfalls.  Contact me at my offices in Snohomish, Washington, to discuss your consumer bankruptcy options and determine which of these options may work for you.

Filing for bankruptcy protection can be a scary time.  We will ease you through the process, answer all of your questions, and go to your Meeting of Creditors with you and help you get your fresh start.