Bankruptcy
Benefits of chapter 7 & 13 Bankruptcy
Filing Chapter 7 bankruptcy is a process provided for under Federal law that entitles you to make a fresh financial start. Chapter 7 eliminates most of your unsecured debt and is normally suggested for someone with few or zero assets. 'Unsecured debts' released by Chapter 7 bankruptcy include credit cards, medical bills, most personal loans, judgments resulting from car accidents and deficiencies on repossessed vehicles. However, filing Chapter 7 bankruptcy is complicated; you need an experienced and knowledgeable bankruptcy attorney from Xcel Law Group to guide you through the entire legal process.
In addition to freeing you from your debt, filing Chapter 7 bankruptcy normally allows you to retain some of your property. If your car and mortgage payments are current and if there is no significant equity in your property, you should be able to make arrangements to reaffirm the debt. Keep your home, keep your car, keep your personal belongings, but eliminate your debt; that is the function of Chapter 7 bankruptcy. Conversely, if you do not file Chapter 7, you may lose your home to foreclosure and your car to repossession due to missed or delinquent payments.
As soon as you file for Chapter 7 bankruptcy, you will be protected from credit agency harassment. Creditors are forbidden to call and pester you once bankruptcy proceedings have started. The ability to re-establish your credit after filing Chapter 7 bankruptcy is better than it has ever been before. Although Chapter 7 bankruptcy can remain on your credit report for up to 10 years, you can start re-establishing your credit right away. Though you may have to pay slightly higher interest rates, you should be able to purchase a home or car and qualify for credit cards very soon after filing Chapter 7 bankruptcy.
Chapter 7 Bankruptcy Eligibility
Chapter 7 Bankruptcy is process which allows individuals to eliminate, or discharge, all, or some, debt in a legal and orderly fashion. Although the end result is simple, the elimination of debt, the process can be tricky and fraught with many pitfalls. To ensure success, the Chapter 7 Bankruptcy filer must be keenly aware of not only the ultimate goal, but also all of the law’s requirements.
The first step to filing a successful Chapter 7 Bankruptcy is to accurately evaluate one’s goals, and one’s eligibility for Chapter 7 Bankruptcy relief. The objective of the typical Chapter 7 Bankruptcy filer will be to eliminate all, or some, of his or debt. Whether or not one is eligible to file is a different issue than whether or not one should file. The person contemplating a Chapter 7 Bankruptcy must first assess whether or not he or she is eligible to file. Requirements are relatively easy. Currently, the requirements are that you have not filed for Chapter 7 Bankruptcy in the previous eight years or a Chapter 13 Bankruptcy that paid less than a 70% dividend to unsecured creditors in the previous six years. In fact, a person filing for chapter 7 need not be a citizen or even a legal resident of the United States, the Code requires that the debtor simply must be a “resident.” If you meet these simple factors, then you would be eligible to file a chapter 7 case.
Next, it is important to assess the advisability of filing a case. This is a more complicated question as bankruptcy laws are complicated. Generally, if you spend more money each month than you make, if you earn less than the average household size in your state, and you do not own any non-exempt assets, a chapter 7 bankruptcy would likely be successful. Obviously where you live is important as the median income numbers and your budget can all affect the success of your case. This is also the point at which it is vital to get competent legal advice from Xcel Law Group.
Once it appears you are eligible and that a bankruptcy would successfully accomplish what you hope, the process can also be complicated. Before you can file a case, the law requires every debtor to complete a credit counselling session. Once this is complete, the legal process of filing a Chapter 7 Bankruptcy begins with the preparation and filing of the bankruptcy petition and schedules. The bankruptcy petition and schedules is a series of documents that contain information about your debts, your assets, income and general financial status for the previous few years. The bankruptcy petition is used to demonstrate that you qualify for Chapter 7 discharge, determine which of your debts will be eliminated, what property you will be allowed to keep and which debts you have chosen to keep.
Once your case is filed, certain documents must be mailed to the trustee assigned to your case and you will be assigned a date for a meeting of creditors as provided under 11 U.S.C. §341. The meeting occurs approximately four to six weeks after filing of the Chapter 7 Bankruptcy. The debtor’s attendance at this meeting is absolutely required, except in very rare circumstances. The Trustee presides over the meeting. The Trustee reviews the filing for possible fraud issues, represents your creditors, and evaluates your qualifications for Chapter 7 Bankruptcy. The Chapter 7 Trustee will also investigate property and valuation. One of the main duties of the trustee is to liquidate any non-exempt property and distribute the proceeds fairly among creditors. At the First Meeting of the Creditors, the Chapter 7 Trustee will ask a series of questions, and typically make his or her findings during this short meeting. If the Chapter 7 Trustee issues a “no asset” report or “abandons” your property, the Chapter 7 Bankruptcy will proceed and the debtor will not lose any property.
If all goes well at the First Meeting of Creditors, approximately 60 to 90 days thereafter you will receive your discharge, and your case will close. During this period all of your creditors will be give an opportunity to review your Chapter 7 Bankruptcy filing, and have the right raise object to it. You will also be given the opportunity to reaffirm, or promise to keep paying on, your secured debts such as a home or a car. At the time of your discharge, your pre-filing unsecured dischargeable debt will eliminated forever!
Your Chapter 13 Bankruptcy case begins by filing a petition with the bankruptcy court in the city or town where you live. You will be asked to submit to the court the following: a current listing of your assets and liabilities, a list of your current income and expenditures, a schedule of certain loan contracts and unexpired leases and a complete statement of your financial affairs.
You may be eligible to file Chapter 13 if you have a current regular income. Chapter 13 will allow you to keep your property and pay off your debts over time, usually three to five years, pursuant to a court-approved repayment plan as well as approved financial counselling. You may be eligible to file Chapter 13 debt-relief as long as your unsecured debts (i.e. credit cards) are less than $360,475 and secured debts (i.e. car loans, mortgages) are less than $1,081,400, to date.
Most importantly, perhaps, Chapter 13 offers you the opportunity to save your home from foreclosure. By filing Chapter 13 bankruptcy, you can stop foreclosure; however, you must be able to make all mortgage payments during this time. Another advantage of filing for Chapter 13 bankruptcy protection is that it will allow you to repay your other debts over the life of your Chapter 13 plan, often resulting in lower payments. Chapter 13 also has a special provision that may protect any co-signers you may have. In addition you will have no direct contact with creditors while under Chapter 13 protection.
Businesses can't declare bankruptcy under Chapter 13
A business, even a sole proprietorship, cannot file for Chapter 13 bankruptcy in the name of that business. need to declare bankruptcy under Chapter 11 when they need help reorganizing their debts.
If you own a business as a sole proprietor, however, you can file for Chapter 13 bankruptcy as an individual and include the business-related debts for which you are personally liable.
You Must Have Stable and Regular Income
You must have stable and regular income to be eligible to declare bankruptcy under Chapter 13. That doesn't mean you must earn the same amount every month. But the income must be steady -- that is, likely to continue and it must be periodic -- weekly, monthly, quarterly, semi-annual, seasonal or even annual. You can use the following income to fund a Chapter 13 plan:
You Must Have Disposable Income
For you to qualify for Chapter 13 bankruptcy, your income must be high enough so that after you pay for your basic human needs, you are likely to have money left over to make periodic (usually monthly) payments to the bankruptcy court for three to five years. The total amount you must pay will depend on how much you owe, the type of debts you have -- certain debts have to be paid in full; others don't -- and your court's attitude. A few courts allow you to repay nothing on debts, which legally, don't have to be repaid in full, as long as you repay 100% of the others. Some courts push you to repay as close to 100% of your debts as possible. Most courts fall somewhere in between.
To determine if your disposable income is high enough to fund a Chapter 13 plan, you must create a reasonable monthly budget. If you are not proposing to repay 100% of your debts and the court, the trustee or a creditor thinks your budget is too generous -- that is, it includes expenses other than necessities -- your budget will be challenged.
Your Debts Must Not Be Too High
You do not qualify to declare bankruptcy under Chapter 13 if your secured debts exceed $922,975.00. A debt is secured if you stand to lose specific property if you don't make your payments to the creditor. Home loans and car loans are the most common examples of secured debts. But a debt might also be secured if a creditor -- such as the IRS -- has filed a lien (notice of claim) against your property.
In addition, for you to be eligible for Chapter 13 bankruptcy, your unsecured debts cannot exceed $307,675. An unsecured debt is any debt for which you haven't pledged collateral. The debt is not related to any particular property you possess, and failure to repay the debt will not entitle the creditor to repossess property. Most debts are unsecured, including bank credit card debts, medical and legal bills, student loans, back utility bills and department store charges.
Benefits of Chapter 7 & 13 Bankruptcy
While both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy offer benefits to the individual consumer, each type of bankruptcy provides the individual consumer with differing types of benefits and opportunities. The benefits of filing a Chapter 7 Bankruptcy verses a Chapter 13 Bankruptcy are not mutually exclusive. In other words, while some of the benefits are different, they both provide the consumer with the opportunity for a fresh start and new lease on life. Choosing between which type of bankruptcy best suits your situation will depend on your long term and short term goals.
The primary benefit of a Chapter 7 Bankruptcy is the elimination of most or all of your unsecured debt. Unsecured debt is debt that does not have collateral, or property attached to it. An unsecured debt is debt for which a creditor cannot repossess, or take back, a particular piece of property for failure pay on that debt. The most common examples of unsecured debt are credit cards, medical bills, payday loans, utility bills and personal signature loans. All of those types of debt can be are eliminated in Chapter 7 Bankruptcy. Upon successfully completing a Chapter 7 Bankruptcy you will not owe your creditors anything for most types of unsecured debts. By contrast, in a Chapter 13 Bankruptcy, you must pay back your debt based on what you can afford. Certainly you do not have to pay back everything you owe in chapter 13, but you will have to pay something. While there are some types of debt that cannot be eliminated in any bankruptcy, the principle benefit of a Chapter 7 Bankruptcy is the elimination of most type of unsecured debt without payments to anyone.
Another benefit of Chapter 7 Bankruptcy is that you can obtain relief from your debts in a shorter period of time. The typical Chapter 7 Bankruptcy case is discharged three to four months from the date you file your Chapter 7 Bankruptcy case with the court. Discharge means that you officially do not owe creditors anymore. A Chapter 7 Bankruptcy can help you become debt free in only three to four months!
While a Chapter 13 Bankruptcy can also help eliminate some of your unsecured debt, the principle benefit of Chapter 13 Bankruptcy is the ability to help you with secured debt. The filing can stop a home foreclosure or the repossession of other types of secured collateral, like a car. A Chapter 13 Bankruptcy is a repayment plan through bankruptcy court. Typically, a repayment plan lasts 36 to 60 months and provides for paying back your secured creditors the outstanding delinquency at time you file your Chapter 13 Bankruptcy. If you successfully complete a Chapter 13 Bankruptcy repayment plan, you will emerge debt free and current on your house and car!
The other main benefit of a Chapter 13 Bankruptcy is the 100% protection of your valuable assets from seizure by your creditors. Although Chapter 7 Bankruptcy provides for some protection of your assets through state created "exemptions," not all of your property may be completely shielded from seizure. If you own a home or car that that is paid in full or has significant equity, a Chapter 13 Bankruptcy will allow you to reap the benefits of a bankruptcy stay and discharge, the elimination of at some or most of your debt, and allow you to keep your hard earned assets!
While the end results of Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are similar, some the benefits from each type of Bankruptcy can be very different. In order to determine which type of Bankruptcy you should file or which type of bankruptcy best suits your needs and long term goals you need to seek advice from Xcel Law Group.