The main goal of bankruptcy law is to give you, the consumer, a fresh start, free from your previous debts, and with enough assets to live on and get you started again. The Bankruptcy Code sets up different classes of debts and property, which determine what property you can and can't keep, and whether and how much your creditors are paid. Typically, consumer bankruptcies take the form of either Chapter 7 or Chapter 13 bankruptcy.
Whether you file a Chapter 7 or Chapter 13 bankruptcy, a court order called an "automatic stay" goes into effect. The automatic stay prohibits most creditors from taking any action to collect the debts you owe (unless the bankruptcy court lifts the stay and lets the creditor proceed with collections).
Bankruptcy offers the possibility to eliminate your legal obligation to pay back some or all of your debts. This elimination of debt is called a "discharge."
Filing may prevent your car from being repossessed.
It may also stop or postpone foreclosure on your home, allowing you to catch up on your payments.
Bankruptcy may stop your wages from being garnished and prevent creditors from harassing you.
You may be able to keep your utility service or have it restored if it has already been disconnected.
You must obtain budget and credit counseling from one of the USDOJ approved agencies within 180 days before your bankruptcy case is filed. Our office can provide you with an abridged list of approved credit counseling agencies (or visit www.usdoj.gov/ust for the full list). We recommend you schedule a consultation with us to discuss your options before obtaining credit counseling. We further recommend that you research the credit agencies prior to choosing one. If you have any questions about what the agency is providing for you, please let us know. At the end of counseling, make sure you obtain a certificate from the agency proving you received your counseling; you will need it to file bankruptcy.
There may be other solutions to your debt-related problems that do not involve filing for bankruptcy. You should discuss the particulars of your situation with us so we can guide you toward your best solution. Other options we may explore with you include debt settlement, loan negotiation, short sale, and other foreclosure prevention resolutions.
Chapter 7 is also known as "straight" bankruptcy, "fresh start" bankruptcy, and "liquidation" bankruptcy. It gives debtors a fresh start by discharging, or wiping-out, most unsecured debt. For example, some common debts that are wiped-out in a Chapter 7 are credit cards, medical bills, and deficiencies on repossessed vehicles. In addition, a bankruptcy discharge releases the debtor from personal liability and prevents the creditors from taking any further action against the debtor or the debtor's property to collect the debts.
If staying in your home and/or keeping your car are important to you, this may not be the best option. A Chapter 7 bankruptcy does not eliminate the potential for secured creditors, such as your mortgage holder or car loan creditors, from confiscating that property.
The 2005 Amendments to the Bankruptcy Code established something known as the "means test" to determine debtor eligibility for a Chapter 7. If the means test concludes that you have the ability to pay creditors, you will not be eligible for a Chapter 7 bankruptcy and may need to file a Chapter 13 instead.
Chapter 7 Bankruptcy is basically set up to force your creditors, whether a mortgage company, taxing authority or credit card company, to stop their debt collection efforts. The filing of a Chapter 7 Bankruptcy Petition forces your creditors to stop all collection efforts. This means that your mortgage company must stop foreclosure efforts, taxing authorities must stop garnishments or levies or other collection efforts, and credit card companies must stop any collection efforts, including phone calls, letters, lawsuits, etc.
Once the bankruptcy is started with the filing of the petition, your case will be assigned to one of several Chapter 7 Trustees. Approximately 30-40 days after the bankruptcy is started, you MUST attend a meeting of creditors with the Chapter 7 Trustee assigned to your case. An attorney from our office will attend the meeting with you. You MUST attend this meeting or your case will be dismissed. You are required to bring to the meeting an original, government-issued picture ID (your driver's license or US passport) and original Social Security Card as proof of your social security number. (There are permissible substitutes.)
You must continue to make payments on your secured debts (car, mortgage) if you desire to keep these items. You must also continue to pay your real estate taxes, homeowners' association dues, and income taxes. If you have any utilities, phone or cable bills, you must make your current payments. The amounts you owed may be discharged. Be advised that many utilities may (and most do) charge a security deposit to continue service.
Once the Chapter 7 petition is filed and the case is started, there are certain bills that you must continue or start to pay. You must:
Continue to pay the car loan/lease and keep it current (if you've decided to keep the car).
Continue to pay your other monthly expenses, such as utilities, phone, cable, etc.
Pay your regular monthly mortgage payment. YOU MUST NOT GET BEHIND.
Pay any future property tax bills as they come due unless your mortgage company has set up an escrow impound account to pay your taxes. If you pay property taxes, you must pay these as they come due.
YOU SHOULD NOT PAY ANY OF YOUR CREDIT CARDS OR OTHER UNSECURED DEBTS.
If you have any questions about who/what to pay, IMMEDIATELY contact your attorney.
Chapter 13 bankruptcies often provide a solution for people who have faced short-term financial setbacks like job loss, illness, or large unexpected expenses. Since Chapter 13 combines the automatic stay with the ability to catch-up past due payments over time, many people looking to stop foreclosure or avoid repossession choose Chapter 13 bankruptcy.
In Chapter 13, a repayment plan is filed with the bankruptcy court in order to pay back all or a portion of your debts over time (from 36 - 60 months). As part of the repayment plan and perhaps the most important benefit of filing a Chapter 13, you are able to keep certain valuable property that you continue to make payments on, such as your home or your car.
Contact the Law Offices of Darren J. DiMarco for assistance. Call 949-401-6155 or Email us at email@example.com.