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Bankruptcy Questions

Chapter 7 vs Chapter 13 Bankruptcy: Which is for you?

  • Reasons for Filing a Chapter 13 Bankruptcy
  • Reason for Filing a Chapter 7 Bankruptcy
  • Advantages of Any Type of Bankruptcy

  1. Reasons for Filing a Chapter 13 Bankruptcy
        1) To stop a foreclosure on your home and have the opportunity to catch up the payments
        2) The Debtor is permitted to keep property that would be lost in a Chapter 7 Bankruptcy
        3) Chapter 13 Bankruptcy protects anyone who has co-signed a loan agreement with the Debtor
        4) The Debtor may be permitted to sell certain property to pay off debts
        5) The Debtor can minimize the value of a vehicle which in effect will decrease the loan on the vehicle
        6) The Debtor can to a certain degree list the unsecured creditors as to priority of payment
        7) Certain debts incurred by lawsuits and/or fraud may be able to be discharged
        8) The debtor can continue to operate a sole proprietorship or business
        9) The debtor will be responsible for the debt at the time of filing excluding interest and late fees
        10) Sometimes a Chapter 13 Bankruptcy filing is more acceptable to refinancing institutions than a Chapter 7 Bankruptcy
     
  2. Reason for Filing a Chapter 7 Bankruptcy
        1) Less Commitment
        2) Easier
        3) Less Time
        4) Full Relief from existing Unsecured Debt
     
  3. Advantages of Any Type of Bankruptcy
     
    AUTOMATIC STAY: This part of the Code prohibits creditors from calling, writing, suing, or taking any other action against a debtor in an effort to collect a debt. If creditors continue to contact or harrass a debtor after filing bankruptcy, the Court may sanction the creditors by ordering the creditors to pay compensatory and/or punitive damages, plus attorneys fees incurred by the debtor in bringing the matter before the Court.
     
    A NEW START: Chapter 7 vs Chapter 13 Bankruptcy
     
    CHAPTER 7 BANKRUPTCY
     
      FEES:
      Bankruptcy filing fee as of June, 2010: $  299.00 (per couple)
      Initial Credit Counseling Fee (Required prior to filing): $    50.00 (per couple)
      Debtor Education Fee
      (Required after filing but prior to discharge):
      $    50.00 (per couple)
      Subtotal: $  399.00 (per couple)
      Minimum Legal Representaton Retainer: $1,300.00
      Total: $1,699.00
       
      APPROXIMATE TIMEFRAME OF DISCHARGE AFTER FILING:
      Meeting with Bankruptcy Trustee at the Bankruptcy Court: 4 weeks after filing
      Discharge: 3 Months after filing
       
      NECESSARY FACTS CONCERNING CHAPTER 7 BANKRUPTCY:
       
      1. Any individual or business entity unable to pay his, her, or its debts as they come due can file a Chapter 7 bankruptcy.
       
      2. There is no limit on the amount of debt a person has in order to file for a Chapter 7 bankruptcy.
       
      3. Although the debtor must meet with the Bankruptcy Trustee (so-called because we trust him) approximately one month after filing this meeting is very short. It is designed to permit the Creditors an opportunity to voice their objections. Usually, there is no argument concerning a debtor's financial position because the debtor generally doesn't own anything that a Creditor can take.
       
      4. Chapter 7 will not discharge secured debts and will not protect a Debtor who is unable to make payments on their home or vehicle.
       
      The most difficult aspect of filing for a Chapter 7 Bankruptcy is the accurate listing of the debtor's debts, assets, income, and expenses, and correctly answers the questions posed on the Statement of Financial Affairs.

     
    CHAPTER 13 BANKRUPTCY
     
      FEES:
      Bankruptcy filing fee as of June, 2010: $  274.00 (per couple)
      Initial Credit Counseling Fee (Required prior to filing): $    50.00 (per couple)
      Debtor Education Fee
      (Required after filing but prior to discharge):
      $    50.00 (per couple)
      Subtotal: $  374.00 (per couple)
      Minimum Legal Representaton Retainer: $1,500.00
      Total: $1,874.00***
       
      *** Although there may be additional legal and administrative fees, these other fees will be paid through the Chapter 13 plan.
       
      APPROXIMATE TIMEFRAME OF DISCHARGE AFTER FILING:
      Submission of a Payment Plan Required no later than: 15 days after filing for Bankruptcy
      Meeting with Bankruptcy Trustee at the Bankruptcy Court: 4 weeks after filing
      Discharge: 3 to 5 years after filing
       
      NECESSARY FACTS CONCERNING CHAPTER 13 BANKRUPTCY:
       
      1. The Debtor's unsecured debts may not exceed $336,900
      2. The Debtor's secured debts may not exceed $1,010,650
       
      THE PAYMENT PLAN
       
      The Debtor must show the Trustee and the Court that they have enough money to live on while paying off their debt in a three to five year period.
       
      The Debtor must be able to pay a Chapter 13 Trustee enough money so that the Trustee can pay creditors at least as much as those creditors could have received if the individual filed a Chapter 7 bankruptcy.
       
      The Trustee has much more responsibility in a Chapter 13 Bankruptcy Filing: as opposed to a Chapter 7 Filing, the Trustee collects the funds paid by the debtors over the three to five year payment plan and pays out the money to creditors on a monthly basis. The Trustee supervises the debtors' progress with the payment plan.
       
      The three to five year payment plan can cause you to catch up on your mortgage payments and pay for your vehicle during the time you are in the plan.
       
      DEFAULT
       
      If debtors are unable to comply with the payment plan, the Trustee makes a report to the Court, and/or requests the Court dismiss the case or convert it to a more appropriate chapter (such as Chapter 7).
       
      If the debtor completes the three to five year plan his debts incurred up to the point of filing Bankruptcy will be discharged.

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