Chapter 7 or 13?

Bankruptcy is a legal proceeding filed by a debtor who seeks relief provided by Federal Bankruptcy law. It is a remedy that helps people regain control of their finances when debts become unmanageable. Thus, it is nothing more than a fresh financial start. The law says that a person is entitled to start over financially provided that no dishonesty was committed in getting into debt. If you are overwhelmed with financial problems, do not be discouraged. As a consumer, you have rights under Federal Bankruptcy law that may provide you the relief that you need if you are eligible.

chapter 7

This type of Bankruptcy eliminates most kinds of debts. Generally, unsecured debts such as credit card debts, personal loans, medical bills, unsecured lines of credit and other unsecured obligations can be legally wiped out in Chapter 7. Secured debts are not dischargeable unless you surrender collateral. In certain situations, secured debts may be reduced.

If non-exempt assets are available, they may be liquidated by the Bankruptcy trustee to pay some or all of your debts. Remember, however, that most Chapter 7 cases are “no asset” cases. As a matter of fact, over 90% of our clients keep everything that they own and lose nothing. As your attorney, we will exempt your assets to the fullest extent allowed by law. If necessary, we will guide you through careful pre-petition planning before we file your case.

Certain unsecured debts such as child or spousal support, most taxes, government fines or debts incurred by fraud are not dischargeable in Bankruptcy.

After obtaining a Chapter 7 discharge, you may start rebuilding your credit immediately. Start paying bills on time and establish a favorable payment history with future creditors. Although Bankruptcy is reported on your credit report for several years, wiping out your debts may actually improve your credit rating if it lowers your debt to income ratio.

chapter 13

This type of Bankruptcy allows you to repay all or only a portion of your debts over a 3-5 year period. It is available to individuals who have regular income and whose debt amounts do not exceed the limits set by law.

Depending on how much you have left over from your net income after paying for living expenses, it is possible to pay creditors only a small fraction of the actual amounts owed. In most cases, your total debt is greatly reduced and interest on credit cards and most debts is reduced to 0%, thus allowing you to pay off the principal amounts over a much shorter period of time. Chapter 13 allows you to combine all your current bills and back payments into one affordable monthly payment.

If you are facing foreclosure of your home or other real property, filing for Chapter 13 may allow you to save your property by proposing a feasible payment plan to the Court. Once the plan is approved, creditors must accept it. Non-dischargeable taxes, back child support and student loans may be paid without interest over 3-5 years.

After reviewing your income, expenses and all other facts of your case, we will formulate a Chapter 13 plan for you that allows you to make the lowest monthly payment possible.

which chapter is right for you?

We may advise you to file under Chapter 7 if your debts are too large and your income is too low that it is impossible or difficult for you to pay all or a portion of what you owe through Chapter 13. Chapter 13, on the other hand, may be a better option if you have the desire and ability to pay all or a portion of your debts, most or all of your debts are non-dischargeable under Chapter 7, you have non-exempt assets that may be at risk if you were to file under Chapter 7, or if your objective is to stop a foreclosure and cure arrears on real estate.

There may be other reasons why one chapter is preferable over the other. You can benefit from our knowledge of the law and our past experience in obtaining the type of debt relief that you need for your situation.