Bankruptcy Information

This is designed to provide you with some general information regarding bankruptcy law and is not to be construed as comprehensive information regarding the filing of a bankruptcy.

There are four main types of bankruptcy filings. The two types generally used for consumer bankruptcies are Chapter-7 and Chapter-13.  The bankruptcies are as follows:

Chapter-7

This is a liquidation of debts and assets.  A trustee is appointed by the Court as an intermediary to review the case. Any non-exempt property of value can be taken by the trustee, who sells it and uses the money to pay your creditors.  Examples of some non-exempt property are timeshares, any tax refunds to which you are entitled, and certain recreational vehicles. Generally speaking, non-exempt property is property the law does not deem necessary for your daily living or employment.  In this type of filing, you must be current on your payments on any property that you wish to keep such as your home or car. 

Chapter-13

This is a reorganization. To be eligible for a Chapter-13 filing, you must have “disposable income”, which means, after you have paid your regular monthly allowed living expenses, you have funds left over for payment to a court appointed trustee, who distributes the funds to your creditors.  This type of filing is beneficial for people who are behind on their home or auto payments and want to retain the property. It allows the filer to catch-up on missed house payments and/or pay the value of a vehicle through a plan of reorganization.

This type of filing is also beneficial for individuals who have nonexempt property they wish to retain, such as a recreational vehicle, as long as the value of the non-exempt property is paid through the plan.  Chapter-13 provides debt relief for consumers with a level of disposable income that renders the ineligible for a Chapter-7 filing.

Chapter-12

This bankruptcy is like a Chapter-13 filing, but is  only for family farmers.

Chapter-11

This bankruptcy is used mostly for businesses, or for individuals who exceed the debt limitations for a Chapter-13 filing.

Upon completion of a Chapter-7, or after you have made all required plan payments in a Chapter-13, you will receive a discharge of debt.  A discharge is a Court order which states that you are no longer personally liable for certain debts. There are some debts which cannot be discharged in a bankruptcy proceeding. Examples of such debts are:

  1. most recent tax liabilities
  2. child support
  3. most student loans
  4. court fines or criminal restitution
  5. personal injury liability caused by driving drunk or under the influence of drugs.

You are eligible for a Chapter-7 discharge once every eight years.  You cannot be forced to pay a debt that has been discharged.  However, creditors with secured claims, such as a mortgage loan or a lien on your vehicle, retain their liens and can take possession of the property if you fail to stay current on your payments.

Contact us today and speak with one of our debt relief specialists at any of our valleywide locations:

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