What is the difference between Chapter 7 and Chapter 13?
A case filed under Chapter 7 of the Bankruptcy Code is used to provide a “discharge” of many debts. A discharge is the mechanism by which money owed to a creditor becomes uncollectable. The entire case usually lasts no more than a few months, and in most cases, debtors are able to keep most of their property.
In a Chapter 13 case, a debtor with regular monthly income presents a plan by which some or all of the debt owed will be repaid on a monthly basis over a term of 3-5 years. The amount to be repaid is determined by a calculation provided by the Bankruptcy Code known as the means test. A discharge of most remaining debts is achieved after all plan payments have been made.
Should I file Chapter 7 or 13?
Chapter 7 is usually more favorable to Chapter 13. However, not everyone will qualify or want to file a Chapter 7. For example, in some cases, in order to save a home, a Chapter 13 must be filed. Each case is unique, and together with your attorney you should decide the best course of action.
What happens before filing my bankruptcy case?
To determine the best course of action in each individual case, your attorney will request many different documents from you. It may take time to collect everything, and it may seem burdensome. However, it is important that your attorney receives all requested documents so that he or she has the required information to provide you with the best options on how to proceed. The recommendations your attorney provides to you can only be as good as the information you provide to your attorney.
Also, prior to filing a bankruptcy case, you must take a Credit Counseling course. This can usually be done online or over the phone. After filing the case you must also take a Debtor Education course. Your bankruptcy attorney will likely refer you to a website to take these courses. The cost of these courses ranges from $15 to $50.
What happens after I file for bankruptcy?
Upon the filing of either a Chapter 7 or 13 case, an automatic stay goes into effect. This means that once the case is filed, creditors are prohibited from making any further collection attempts. No more phone calls and letters. Any pending lawsuits are put on hold, including foreclosure proceedings.
Upon filing, the government appoints a trustee to oversee your case and a Meeting of Creditors is scheduled. The trustee reviews the filed paperwork to ensure that everything is in order. At the Meeting of Creditors, the trustee will ask you questions about the paperwork. Although the name of the meeting suggests that creditors will be there, that is rarely the case. In most Chapter 7 cases, the meeting lasts no more than a few minutes. Usually, you receive your discharge and the case closes approximately 60 days from the meeting.
In Chapter 13 cases the trustee also asks questions regarding the filed paperwork. The trustee will also discuss the plan that was filed and may inform you of any objections he or she has to the plan. It is not unusual to file more than one plan in a case to satisfy the trustee’s requirements. However, it is important to begin making plan payments starting immediately after filing the case. If you fail to make these payments, your case can be dismissed. The plan will eventually be presented to a Bankruptcy Judge who will confirm or deny the plan. If the plan is denied, you will almost always be allowed to amend the plan. Once the plan is confirmed, payments will normally be deducted directly from your paycheck until all payments have been made. After all plan payments have been made, you will receive your discharge.
What happens after my case closes?
After your case closes, you can begin to rebuild your credit. Many debtors receive credit card offers soon after their case is closed. To rebuild your credit, you must utilize credit. However, you must be very careful about how you do so. You never want to carry a balance over from one month to the next, and you want to make sure you make all your payments on time.
If you think that filing for bankruptcy might be right for you, call me, your local Bel Air bankruptcy attorney.