Before you begin the bankruptcy process, you should consider all your debt-relief options.
The relief provided by a bankruptcy filing does come at a cost. Your bankruptcy filing will be public information. To help you make a more informed decision, we have answered some of the more frequently asked questions about bankruptcy.
What’s the difference between Chapter 13 and Chapter 7?
On the simplest level, the difference between Chapter 7 and Chapter 13 is that Chapter 7 liquidates certain assets and wipes out your debt, and Chapter 13 reorganizes your debt and creates a payment plan.
Chapter 7 bankruptcy liquidates your debt over a three- to six-month period and may involve forfeiting property. However, some types of debt, like taxes and child support, cannot be discharged through Chapter 7.
Chapter 13 bankruptcy involves working with your creditors to create a repayment plan. Repayment plans are either three or five years in length. If your monthly income is too inconsistent or too low, you may not qualify for Chapter 13.
Will I be able to keep my car?
Bankruptcy filers often are able to keep their car when filing for bankruptcy. Motor vehicles are considered “necessities of modern life,” meaning that taking it away from you would make it difficult for you to work and function. Taking away a vehicle is counter-productive in trying to help you get back on your feet. However, a second car or truck may be taken away.
Will I be able to keep my house?
If you file for Chapter 7 bankruptcy, you may lose your home as part of the liquidation process. This depends on several factors, including whether you are behind in house payments and if you will be able to afford your house payment after filing. It also depends upon how much equity you have in your home.
If you file for Chapter 13 bankruptcy, your mortgage will be included in your repayment plan and you will keep your home.
What will happen to my credit score?
Many people have very low credit scores when they are on the verge of bankruptcy. The good news is that if you stick to good credit practices your score can rise.
While Chapter 7 bankruptcy stays on your credit record for 10 years and Chapter 13 bankruptcy stays on your record for seven years, you can repair your credit score by making on-time payments and not accumulating new debt.
Will bankruptcy stop the harassing collections calls?
When you file for bankruptcy, an automatic stay goes into effect. This is a court order that prohibits creditors from making calls or carrying out any other collection activities. An automatic stay will temporarily stop eviction and foreclosure proceedings as well as prevent utility services from shutting off services.
To Learn More About Bankruptcy, Contact The Law Offices Of John C. Hanrahan, LLC
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.