CHAPTER 7 SUMMARY *** WHAT IS A CHAPTER 7 BANKRUPTCY?
A Chapter 7 Bankruptcy is called a “Liquidation” case, and is often referred to as a “straight bankruptcy.” It is called a “Liquidation,” even though nothing is ever liquidated is the large majority of cases filed by working people. But in principal, the Chapter 7 Trustee appointed to your case would take control of your non-exempt property and liquidate it, meaning it would be turned into cash by sale, and the proceeds would be divided between your creditors.
The reason most cases do not involve the liquidation of any property is because of the exemptions allowed you by law. “Exemptions” are the real estate and personal property items that the law of the state where you live excludes from the reach of creditors. with If you have any assets that the Chapter 7 Trustee deems it worthwhile to liquidate, the Trustee will obtain possession of them and sale them, using the proceeds to pay creditors to the extent of money realized through this sales. But as stated, in the vast majority of cases handled by this law firm, there are no substantial non-exempt assets, and therefore no liquidation sale. Generally speaking, whether or not some or your assets are liquidated, you will receive a discharge of your debts, meaning they are no longer owed, and this is provided to your by Federal Law.
A “discharge” is the legal forgiveness of your debts, such that your creditors can never again attempt to collect payment from you for those debts that have been discharged.You may not receive a discharge of debts if you have previously received a discharge in a previous case that was filed within four (4) to eight (8) years of the date the later case is filed. The number of years varies with the circumstances and this will be covered during your consultation with the Attorney, if the issue is relevant Even if you have already filed Bankruptcy under Chapter 7 within the applicable time frame, you may still file under Chapter 13, and this is often beneficial, depending on your circumstances. The reverse is also true, meaning that you may file a Chapter 7 sooner if the prior Bankruptcy Discharge was under Chapter 13.Your bankruptcy may be reported on your credit record for as long as (10) ten years, and seven (7) in the case of Chapter 13.
It can affect your ability to receive credit in the future. But home loans and automobile loans can nevertheless often be obtained with Bankruptcy on your credit report. It depends on the totality of circumstances. I personally recommend that people not use long term credit for purposes other than home and car. It just doesn’t make good financial sense to pay for interest on debts. On the other hand, to build a better credit rating, having other credit that is carried along “for show,” with a balance owed that is not close to your credit limit may suit you well. In this case, the use of credit, other than for house and car, is not because one needs to purchase on credit, but because one is strategically creating a credit profile that fulfills some of the positive criteria that credit unions use to create your credit rating. In my personal opinion, it makes good sense to purchase products and services with a credit card only when you pay the entire balance owed on your card at the end of each month.
Besides building a good credit rating, purposes for using credit cards as described include the fact that you can often obtain benefits, such as frequent flyer miles on airlines through the use of your card.MORE ON BANKRUPTCY DISCHARGE AND HOW IT OPERATES? One of the reasons people file bankruptcy Is to get a “discharge”. A discharge is a Court order which states that you do not have to pay most of your debts. Some debts cannot be discharged. For example, you cannot discharge debts for:
• most taxes
• child support
• most student loans **changes to law have occcured
• Court fines and criminal restitution
• personal injury caused by driving drunk or under the influence of drugs.
The discharge only applies to debts that arose before the date you filed. Also, if the Judge finds that you received money or property by fraud, that debt may not be discharged. It is important to list all your property and debts in your bankruptcy schedules. If you do not list a debt for example, it is possible the debt will not be discharged. The Judge can also deny your discharge if you do something dishonest in connection with your bankruptcy ease, such as destroy or hide property, falsify records or lie, or if you disobey a Court order. Some creditors hold a “secured claim,” for example, the bank that holds the mortgage on your house or the bank that has a lien on your car. You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property, because the line survives. This is why you will often want to continue to pay those debts. CHAPTER 7 BANKRUPTCY CAN WIPE OFF ALL YOUR DEBT AND ALLOW YOU TO OBTAIN A FRESH START, AND NEW LEASE ON LIFE
CHAPTER 13 SHORT SUMMARY
Are you having financial difficulties and need a solution you have not yet found? There is an important federal law that allows you to consolidate your bills into one monthly payment you can afford and in many cases keep your home, personal possessions, automobiles and even cash? Creditors do not have to agree with your plan, but can be legally required to accept its terms. You can do this all and avoid filing a “straight” Chapter 7 Bankruptcy. The Chapter 13 Individual Debt Adjustment is also sometimes called an “Individual Reorganization” or a “Wage Earner Plan”. The amount of money needed to get started varies with the circumstance. Because we will work with you, most of the attorney fees are paid to us from your consolidated monthly payment. Chapter 13 is the type of Bankruptcy that allows for consolidation of your debts into a single payment made to the Bankruptcy Trustee, to be distributed to certain creditors according to the terms of the Chapter 13 Plan that you Attorney creates and files on your behalf. Exceptions to the single payment are your monthly living expenses and payments on your home mortgage that come due after your Chapter 13 case is filed. Chapter 13 Bankruptcy is an alternative filing Chapter 7 Bankruptcy, the latter of which is filed to obtain a discharge of all your debts without making payments pursuant to a consolidation plan. In Chapter 13 you also obtain a discharge of all debts that are unpaid after making all plan payments.
Call me, Ronald Ryan, Attorney at Law, Perhaps I can help. After your consultation, I will give you an opinion about your options so that you can make an informed decision as to whether you would benefit most from a chapter 13, chapter 7 or no bankruptcy at all. Whether to file a Chapter 7 or Chapter 13 Bankruptcy depends on your particular circumstances. I will go over the pros and cons of each Chapter and give you a recommendation of which Chapter would be better for you to file, or whether not filing any Chapter would be better. Some of the things that can be accomplished in Chapter 13 that cannot be done through Chapter 7 include:
SAVE YOUR HOME - The mortgage arrearage owed on your primary mortgage on the day your case is filed can be paid over a five (5) year period, without interest, regardless of whether or not the mortgage creditor approves of this. This allows you to retain your home even though you cannot bring the account current.
ELIMINATE THE SECOND LIEN ON YOUR HOME - In a Chapter 13, we can file a special “Adversary Proceeding” within which we can completely avoid the second mortgage on your house and render that debt to the status of any ordinary unsecured debt that can be discharged.
STOP REPOSSESSION OF YOUR AUTO AND ALLOW YOU TO RETAIN IT - We can also retake your car from the creditor even after it has been repossessed. We can often lower the purchase price of your car to the market value of car at the time your case is filed. We can usually lower the interest rate. We can lower the monthly payment for your car by these means, and also because stretch the time to complete the purchase to near the end of a five (5) year plan.
STOP FURTHER INTEREST AND PENALTIES ON TAXES - We can pay state and federal taxes you owed without further interest or penalties over the life of your plan that can stretch as far as five (5) years.
The protections listed above may only be temporarily, but they can be made permanent if we can create a valid and workable Chapter 13 Plan that you can afford.
STUDENT LOAN DEBT - There are now available more advantages to combining Chapter 13 with efforts to find better solutions to student loan situations.
CHAPTER 13 CAN ENABLE YOU TO PAY UNSECURED CREDITORS PENNIES ON THE DOLLARS AND HAS SEVERAL OTHER ADVANTAGES NOT AVAILABLE IN CHAPTER 7
Power of Bankruptcy & Automatic Stay
Stop Harrassing Creditor Calls
Stop Foreclosure of Home
Stop Repossession of Vehicle
Stop IRS Tax Levies
Stop Wage Garnishments
Stop Further Interest and Tax Penalties
Student Loan Debt
STUDENT LOAN RELIEF
There are many more options for student loan relief than previously. For approximately two decades there has been no way to gain freedom from student loans, in bankruptcy, or otherwise, except in case of a “hardship discharge” in bankruptcy, which has had a standard so difficult to meet that it was rarely achieved. This left millions of people inescapable debt so burdensome that it was like living under oppression that we normally do not associate with life in this country. But now there are administrative options for some form of relief, including complete discharge based on disability that has a far easier to establish disability standard. I have a client that obtained an administrative discharge of over $150,000.00 of student loan debt.
Administrative discharge is available for “total and permanent disability.”
Another option includes “Income Driven Repayment,” which provides for payment of a percentage of your income that is much fairer and reasonable than the preexisting system. It is mostly only for federal loans. There are few for private loans. This is only for direct loans, and parent loans may qualify.
There is “Public Service Loan Forgiveness,” whereby persons in certain professions can be forgiven there student loan balance after a ten (10) year payment plan.
It matters whether your have federal or private loans. Most relief applies only to federal loans.
To qualify, for these remedies, your loans must not be in default status. Keep loans out of default - use default prevention measures. Delaying remedies to keep loans out of “default” status. “Deferment” of government covers interest for subsidized loans. “Forbearance” interest accrues but keeps it out of default status. There default remedies that can bring back loans out of default status. One of these is “Rehabilitation,” which can be successfully used only once. Another is “consolidation.” Don’t consolidate government loans with private loans.
OPPORTUNITIES EXTENDED THROUGH 2016
Let me help you with your application for mortgage loan modification.
Special opportunities to modify your mortgage loan the President Obama’s Home Affordable Mortgage Program have been extended through 2016, including the tax breaks that are needed when debt is forgiven. HAMP Loan Modification can be done in conjunction with bankruptcy or separately.
1. Combine application for mortgage loan modification with chapter 13 plan and reorganize debts and entire expense budget. Filing bankruptcy imposes an automatic stay of all foreclosure measures. Loan modification applications are now having a high rate of success.
2. Mortgage modification applications generally halt foreclosure efforts. They can take many months to be reviewed and during this time you if unaffordable you do not have to make mortgage payments, giving you a much needed break. When approved, you need not catch up the arrearage. You begin with a clean fresh start with monthly payments fit to your ability to pay, generally 31% of your monthly income.
3. You can save your home the old fashion way with a chapter 13 individual debt readjustment plan. Along with other advantages that may apply to your situation, you can catch up your mortgag arrearage over the life of a three (3) to five (5) year payment plan.
4. Let me prepare and submit for you a professional application for a principal reduction mortgage loan modification. One client's loan was reduced by $204,307.16. If you have a loan and circumstances that fit the criteria for this type of modification, your chances of approval are statistically good.
If you have a Fannie, Freddy or FHA mortgage, the type of loan modification you are eligible to apply for is call a "HAMP" modification. Excess principal is not eliminated, but is deferred to the end of the loan without interest. When successful you receive a very low interest rate and your mortgage payments will be reduced to approximately 31% of monthly income.
5. Combine a mortgage loan modification application with a chapter 7 bankruptcy that can wipe off all your other debt and allow you to obtain a fresh start, and new lease on life