Produced by Sheldon Stein, Attorney At Law
How to Get Your Bills Under Control
There is hope for those suffering from severe financial difficulties. Bankruptcy and Chapter 13 enable individuals to solve their debt problems and get a "fresh start" in life. This article will provide a brief overview of these programs.
Is bankruptcy the answer?
Whether or not you should declare bankruptcy depends on the particular circumstances of you financial situation. It may very well be that, after consultation with your attorney, you can resolve your problems through means less drastic than bankruptcy. Bankruptcy, however, may be a necessary step for an overwhelmed debtor. The decision should never be made without consulting an attorney.
What are my options?
There are two types of bankruptcy proceedings that can help individuals get out of debt. The first type of case is a "Chapter 13", or what is also known as a "Wage Earners" program. A Chapter 13 permits you to consolidate your bills and pay them off over a period of time without creditor harassment such as wage garnishment. A major benefit of Chapter 13 is that it stops foreclosure proceedings and permits you to bring your mortgage current. The other type of case is a liquidation, or what is commonly known as "straight bankruptcy " or "Chapter 7". In this type of proceeding you obtain a fresh start in life because most or all of your bills are discharged or wiped out. More about these programs below.
Will creditor harassment and wage garnishments stop?
Yes. When you file Chapter 13 or straight bankruptcy, your creditors must stop all collection efforts. They must cease, for example, telephoning you at home or at the job, sending threatening letters, or garnishing your wages. They must also, at least temporarily, stop attempts at repossessing your car or furniture.
What is a Chapter 13?
A Chapter 13 permits you to consolidate your bills and pay them off over a period of time, without creditor harassment. While you are paying your bills, your creditors may not contact you, garnish your wages, or otherwise bother you. If you qualify for a Chapter 13, you can bring your house note current, even if a foreclosure has been filed. To take advantage of chapter 13, you must have regular and steady income. You may file Chapter 13 even if you recently filed straight bankruptcy.
Do I lose property if I file Chapter 13?
No. None of your assets or property is taken from you by the Chapter 13 Trustee or the Bankruptcy Court. Chapter 13 permits you to consolidate your bills and pay them off with dignity and without creditor harassment.
Will Chapter 13 stop house foreclosures?
In may cases, yes. The filing of a Chapter 13 will stop, at least for a while, foreclosure proceedings. If you are behind in your house payments, Chapter 13 will enable you bring your mortgage current. You can, as part of your Chapter 13 Plan, make payments upon the mortgage arrearage while making the current monthly mortgage payment. Thus, if you are behind in your mortgage payments, you should contact your attorney to learn if you are eligible to file a Chapter 13, and more about how it can help save your home from foreclosure.
What is a "straight" bankruptcy?
The most common form of bankruptcy is what is known as a "straight" or Chapter 7 bankruptcy. In a Chapter 7, most or all of your debts are discharged, i.e., eliminated. This includes, for example, medical bills, most bank loans, credit card debts, utility bills, credit union debts, and most finance company obligations. Sometimes, however, a debt is secured by a lien on collateral such as your home, car, furniture, or bank account. In such cases, you must return the collateral to the creditor. If you wish to keep the collateral, you must enter into a new agreement with the creditor whereby you agree to pay them, and they agree to let you keep such items. Such an agreement is called a "reaffirmation" agreement, and it survives the bankruptcy. Certain other debts, such a alimony and child support, taxes and student loans, may not be dischargeable in a Chapter 7. Because the law in this area is very complicated, it is always wise to consult an attorney to determine which of your bills would be discharged, and whether Chapter 7 is the appropriate program for you.
Do I lose all of my property if I declare bankruptcy?
No. You may usually keep certain property, such as your home, car, clothing, furniture, tools of your trade, and limited amounts of cash, without having to turn over such property to the bankruptcy court for distribution to your creditors. Such property is known as "exempt" property. Whether your property is exempt depends, in large part, on the value of the property, and if it is pledged as collateral to one of your creditors. All non-exempt property is ordinarily given to the bankruptcy trustee for distribution to your creditors. Your attorney can tell you which of your property is exempt, and which is not. It must be kept in mind that if your property is pledged as collateral to one of your creditors, you must continue to make payments to that particular creditor to avoid foreclosure or repossession.
The First Step
If you are in a severe financial situation, the first thing to do is contact your attorney. You must provide complete information to the attorney so that he or she can give you appropriate advice. You should bring with you to the meeting with the lawyer the following information:
- Name, address, and social security number of you and your spouse
- Employment and income information for you and your spouse, including recent pay check stubs
- A list of all creditors (whether you want them included in your case or not), and the amounts owed them
- The deed to your house
- Copies of loan agreements with banks, finance companies, credit unions, etc.
- Any lawsuits or other court papers for cases filed against you
- A list of all of your property
Completeness is essential. Any dept owed to a creditor and not listed in your bankruptcy filings cannot be discharged. As debtor, you must swear that your bankruptcy petition contains a complete listing of debts. By reviewing all your financial information, your attorney will be able to properly advise you as to whether you should declare bankruptcy and, if so, what kind of bankruptcy to file.
LAW NOTES is an advertisement only and intended to be used as a general information source and does not constitute legal advice. Before any action is taken an attorney should be consulted.