When you are facing overwhelming debt, foreclosure, or even harassing creditor calls, it can leave you with a great deal of anxiety or stress causing sleepless nights as well as strain on your personal relationships! Not knowing what to do or how to deal with the problem makes it worse! Get peace of mind by getting answers! With a free no obligation consultation you can see that there are solutions to your situation, and it may not be as bad as you think. You need an experienced attorney to be your advocate! We can help you stop creditors from stealing the equity in your home, your wages, your vehicle, and most important, stop them from stealing the happiness from your life. Within a short time, you can already be on your way to recovering from financial woes and on your way to a happier better life.
When a bankruptcy is filed, the automatic stay immediately goes into effect. The automatic stay stops creditor actions immediately. It stops Foreclosures, Lawsuits, Garnishments, Bank Levy, Repossession, and Recovers Garnished Wages! Most people will file bankruptcy under Chapter 7 or Chapter 13. Each person’s situation is different and filing under the correct Chapter is crucial to meet your goals and avoid costly errors.
There is some overlap in both chapters concerning requirements by debtors. For instance, if you already have a judicial lien on your property, your attorney will have to file a motion to remove the lien otherwise the debt will survive the bankruptcy and you will still be responsible for it. You must take a “Credit Counseling” course prior to filing your case and must take a “Financial Management” course prior to your discharge. However, there are key differences that must be considered to provide the best debt relief possible while meeting your goals.
Chapter 7
Chapter 7 is often the easiest and quickest way to eliminate debt through bankruptcy. The typical case lasts between 4 to 6 months. Chapter 7 allows you to keep all your property, so long as it does not exceed your allowed exemptions. Chapter 7 eliminates most of your debts without the need to pay back your creditors. Exception to this include student loans and taxes that are not eligible for discharge, as well as child support/alimony payments. An attorney should be able to determine if your taxes or student loans are dischargeable, though typically they are not, it is important to speak with an attorney that is knowledgeable with discharging these debts to ensure you eliminate as much debt as possible!
When filing a Chapter 7, the debtor must meet the requirements of the “means test.” The “means test” determines if your income is low enough to file Chapter 7. It is designed to prevent high income people from filing Chapter 7, rather than reorganizing under Chapter 13. The higher level the income, the more complicated and thorough the “means test” becomes. An experienced attorney can make sure all the deductions of the means test are taken and ensure the means test is complete allowing you to show the court that you properly qualify for a Chapter 7, rather than being forced into an unnecessary Chapter 13 by an inexperienced attorney.
Chapter 7 is not a good option when a person is trying to save a home from foreclosure or behind in payments on secured assets (car, home, etc.) they want to keep. There may be some benefits to filing a chapter 13 even when you qualify for chapter 7, an experienced attorney should be able to explain the advantages of both Chapters as it pertains to your specific situation.
Chapter 13
Chapter 13 is an option for people who do not qualify for a chapter 7 because they fail the means test, they have too much equity in their assets, or they are behind in their payments for property they wish to keep.
By filing a Chapter 13, you may be able to eliminate all unsecured debt (credit cards, medical bills, etc.) or pay pennies to the dollar. You can lower or eliminate interest payments on your secured debt (i.e., car payments, furniture, etc.). Most importantly you can save your home with a long-term solution that eliminates the arrears on your mortgage.
A Chapter 13 bankruptcy has a monthly payment you make to the trustee. The Trustee then distributes these funds to various creditors that are entitled to payment in your case. The following is an example of how it works:
Let us say you were behind on your payments on your car, you had no other secured debt, but met the means test, thus entitling you to file under Chapter 7. Chapter 13 would be ideal to file as you would have a means to pay back the car through the Chapter 13 plan. In this example you would pay nothing to your credit cards, medical bills, i.e., your unsecured debt. you would only take the debt owed on your car and divide that by 36 to 60 months. That would determine how much you would pay for your vehicle plus interest. Some people will get an additional benefit if they have owned their car for over 910 days. If you meet this criterion you can pay what the car is worth, rather than the debt owed on the vehicle, whichever is less. For some, the saving can be thousands of dollars.
The idea is the same if your behind on mortgage payments, you divide your arrears by 36 to 60 months, (determined by means test), to get the amount you will pay to catch up on your mortgage payments.
All the debts that are required to be paid will be totaled, your attorney fees will be added to the plan, as well as the trustee fees. This is the basic idea of how your payment plan is determined. There are different classes of debt that are treated differently in the plan, some require interest, some do not, while other may receive a pro rata share or nothing at all. At Johnson Legal you will be advised as to the best course to take in dealing with your creditors.