Chapter 7 Bankruptcy
Filing chapter 7 is called liquidation. It is the most common bankruptcy filed in U.S. bankruptcy court. In chapter 7, a trustee collects the non-exempt property of the debtor, sells it, and distributes the proceeds to the creditors. It is cheap and quick, typically taking 120 days.
Filing chapter 7 bankruptcy costs $200. However, there is some basic chapter 7 bankruptcy information you should know. Unsecured debt can be discharged. Secured debt cannot be discharged, but can be exempted and retained if timely payments are made during the chapter 7 filing. The amount varies from state to state. In a 7, debts that cannot be discharged include: alimony and child maintenance, certain taxes, government backed educational loans, debts resulting from injury or death by the debtor to another entity, and debts for criminal restitution orders. For more information on other non-dischargeable debts, research chapter 7 bankruptcy law or contact your local attorney.
A chapter 7 filing may stay on your credit longer than a chapter 13 filing. In a chapter 7 you pay nothing back to your creditors. If you own a home with significant equity, have assets to protect, or have co-signers to a loan, you probably should not be filing a 7.
You will be required to complete a chapter 7 bankruptcy form. Under the law, it may also be initiated by creditors filing a petition against the debtor. The law initiates an "automatic stay." This stops your creditors from collecting what you owe. Many file to temporarily protect their wages or bank accounts. Until the chapter 7 ends, your financial problems are in the hands of the court. The court assumes legal control of your non-exempt property and debts upon your filing. Nothing can be sold or paid without the court's consent.
If the debtor owns a business, Chapter 7 bankruptcy law 11 U.S.C. § 721 authorizes the trustee to operate the debtors business for a limited period of time, if this will benefit the creditors and enhance the liquidation of the estate. The distribution of the estates property is governed by section 726 and sets forth the claims order of payment. If you have property like an automobile, and want to maintain possession, you may need to reaffirm the debt. The law defines this as an agreement between the debtor and the creditor where the debtor will pay all or a portion of the money owed, even though the debtor has filed chapter 7. You should consult an attorney to ensure your rights are protected.
Rule 4004(c) states that unless a complaint is filed objecting to the discharge of the debts or the debtor files a written waiver, the discharge will be granted relatively early in the process (or 60 to 90 days after the date first set for the meeting of creditors). When filing, a discharge is rarely denied. Under the law, a discharge may be denied if the debtor: fails to obey the court; fails to maintain or produce adequate financial records; does not properly explain any loss of assets; commits a crime; or fraudulently conceals property that would have become the estates property.
A chapter 7 filing may remain on your credit longer than a chapter 13 and there are some debts that cannot be discharged in a chapter 7 that can be discharged in a chapter 13. Chapter 7 can stay in your credit file for up to ten years from the day of your filing, although rarely is it reported for more than seven years. Issuers of credit consider your this in deciding whether to extend credit. Some issuers of credit may extend credit only after a number of years have passed, or when it is no longer on your credit report.
Filing chapter 7 bankruptcy should be the last resort for anyone in a difficult financial situation. There are other options available that should be explored first. Of course, in some cases filing may be necessary. However, as you can see from the information presented, filing should be avoided if possible. A competent debt reduction company will reduce your debts to a manageable level so you dont have to proceed with filing. Click Here for a free consultation from Debt Center USA.
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Chapter 13 Bankruptcy
There are several types of "reorganization": Chapters 11, 12, and 13. Consumers with secured debts under $871,550 and unsecured debts below $269,250 can file Chapter 13. The difference between filing chapter 13 and chapter 7 is: Chapter 13 bankruptcy enables you to retain assets that would be liquidated in Chapter 7. You could keep your home and car under either plan if your equity does not exceed certain limits. Under Chapter 7, you won't be able to keep rental properties, antique collections, etc. which you can retain under a 13.
Consumers with debts exceeding the Chapter 13 bankruptcy law debt limits and businesses can file chapter 11-- a lengthy, expensive process. In any reorganization bankruptcy, you file a plan with the court proposing how to repay your creditors. Some debts must be repaid in full, partially repaid, or not paid at all while others must be paid with interest, paid at the beginning, or paid at the end. All must be scheduled with the name and address of the creditors, allowing them to receive notice of the filing. This is standard of bankruptcy law. Sometimes debtors omit a creditor because they want to continue paying the debt. This violates the law, and is unnecessary, because a debtor can always voluntarily pay a debt, even though it has been discharged with no legal obligation to pay. Creditors are prohibited by chapter 13 bankruptcy law from collecting on discharged debts. This is stated under law 11 U.S.C. § 1301. If a creditor listed in the schedules attempts to collect a debt, the debtor should inform them a of the filing and request they cease collection.
Filing13 is for people who have a lot of non-dischargeable property or too much income to file a chapter 7. Chapter 13 is for consumers or small businesses wanting to repay their creditors while protecting their real estate and personal property and avoiding harassing collections efforts. You cannot file a chapter 7 if you have filed a 7 or 13 within the past 6 years (unless you paid off 70% of your unsecured debts when previously filing chapter13). However, you can file a 13 at any time.
Filing bankruptcy is a lengthy process. Each state has its own exemption limit. The process begins with the filing of forms in the court serving the area where the debtor resides.
A trustee proposes a 3-5 year plan to creditors where the debtor repays part of his debts out of future income. The law states that a plan lasts no longer than five years (bankruptcy law 11 U.S.C. § 1322(d)). To complete the form, the debtor needs to compile the following information: 1. A list of all creditors and their claims; 2. The source, amount, and frequency of the debtors income; 3. Complete list of the debtors property; and 4. A detailed list of the debtors monthly living expenses, i.e., food, shelter, utilities, taxes, transportation, medicine, etc. This chapter 13 bankruptcy information allows the trustee to calculate your affordable monthly payments when considering your living expenses, income, and disposable income. You must live under a strict budget; the court will not allow you to spend money on anything it deems nonessential. The debtors employer can withhold the payment from the debtors paycheck and transmit it to the trustee.
The debtor is examined under oath at a meeting of creditors. This occurs both 20 and 50 days after filing a chapter 13 form. If the United States trustee or administrator designates a meeting place that is not staffed by the United States trustee or administrator, it may be held before 60 days after the order for relief, according to law. The debtor attends the meeting where creditors ask questions about the debtors finances and proposed terms of the plan, as stated in chapter 13 bankruptcy law 11 U.S.C. § 343. Filing chapter 13 allows for car and mortgage payments in the plan. The creditor may be required to accept these payments instead of proceeding with foreclosure or repossession. You have to keep making your house payments and/or car payments throughout the 3-5 year chapter 13 bankruptcy period or you must foreclose or sell.
Filing chapter 13 may be the best option for the following situations: You have substantial secured debt that you want to retain and it cannot be discharged in Chapter 7 bankruptcy due to limited state exemptions; Someone co-signed a loan and would be responsible for it if you filed Chapter 7; or you have an IRS obligation or student loan that can only be discharged in a 13.
In a Chapter 13 filing you repay at least 50% of your debts. It does not remain on your credit as long as a Chapter 7. A chapter 13 could stay on your credit report for up to ten years from the day you file. Yet, rarely is it reported for more than seven years. Issuers of credit consider your filing in deciding whether to extend credit. Some lenders may extend credit only after a number of years have passed, or only after the bankruptcy falls off your credit.
The problem with a chapter 13 filing is that you may end up repaying 50% or more of the debt, in some states the entire amount, and be forced by the courts to make the payments. If you miss a payment you could end up in breach of court and be forced to repay the whole debt. You can stop collection efforts by filing chapter 13 but why tie yourself into making payments by the courts? Unfortunately, the majority of debtors never complete their repayment plans. While filing bankruptcy, most assume they'll complete their plan, only about one third of all debtors do. Many drop out early in the process, without submitting a feasible repayment plan to the court.
In some cases, filing may be necessary. However, as you can see from the information presented, it should be avoided, if possible. A competent debt reduction company can help reduce your debts so you dont have to proceed with it. Click Here for a free consultation from Debt Center USA. To find more information, contact your local attorney or research chapter 13 bankruptcy law online.
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