Frequently Asked Questions People Have About Bankruptcy
Bankruptcy: What Is It?
It’s a federally sanctioned court process that’s been created to help people and businesses who have debts to discharge them or pay them back under some type of payment plan the bankruptcy court agrees to. Bankruptcies are often noted as being liquidations or reorganizations. Liquidations as when the debt has been discharged and reorganization is when the debt is paid back.
It’s imperative that people facing debt and considering bankruptcy need to speak with a bankruptcy lawyer to learn what method of bankruptcy is right for them.
What Kinds Of Bankruptcy Protections Can You Use?
With the help of a bankruptcy lawyer, a person can file for either Chapter 7 or Chapter 13 bankruptcy protection. What are they?
- Chapter 7 is generally available for people who have little to no income or equity. It’s noted as being liquidation, and most unsecured debt is discharged and people can keep their property like vehicles, homes and personal belongings.
- Chapter 13, called a reorganization, is when a payment plan is created and debtor must pay some part of their debt back.
Debt Negotiation Services Provider vs. Filing For A Chapter 7 Bankruptcy Protection: What Are Their Dissimilarities?
The key similarity between them is the end result. Debt negotiation services sets up a payment plan, meaning a debtor must pay back some of their credit card, medical expenses and unsecured debts. The amount to pay back is negotiated between the creditors listed and the service provider. With Chapter 7, these same balances are court discharged, with the debtor having no additional obligations to pay the debt back.
Chapter 13 vs. Chapter 7: In What Way Are They Different?
Chapter 7 bankruptcy lets the complete dismissal of unsecured debts like medical bills, credit cards and personal loans. In order for approval of this type of bankruptcy, a person must undergo and pass the means test. This test will take into consideration your income, expenses, assets and liabilities. If you file for Chapter 13 bankruptcy, a person must have an income level higher than the median and assets of more than $100,000. Rather than your debts being fully dismissed, you’ll have a payment plan set up to pay some of it back over a three to five year span.
Should You Spend Money On A Chapter 13 Lawyer?
Since the bankruptcy process is so complicated, it’s imperative you hire an attorney to help you wade through it all. Chapter 13 lawyers can assist people in savings thousands of dollars using various actions like lien stripping. This is the act of dismissing home loans that originated from the first mortgage and when the home’s value has dropped under the balance of that first mortgage.
What Kind of Protection Are You Offered With Bankruptcy?
If you file Chapter 7 or Chapter 13, creditors must quit any and all collection efforts. They may not write, call, file, repossess, visit, foreclose, continue with lawsuits or file a lawsuit. They must also halt any court-ordered wage garnishments. A bankruptcy court may start up collection efforts once more if the court approves it.
Is Your Social Security Payments In Danger When Filing Bankruptcy?
Social Security benefits have protection from any bankruptcy or garnishments. They stay protected so long as they’re not entwined in any money that’s in a checking, savings or other accounts. A person who files for bankruptcy without a lawyer often overlook this.
Will You Lose Your Personal Property When You File For Bankruptcy?
Exemptions in bankruptcy code lets people keep exempt property. Each state varies in their definition of exempt property, usually including homes with equity of certain values and vehicles. With the help of an experienced bankruptcy lawyer, you can learn what the assets’ values are to make sure you get the best possible outcome. Side note: furniture and personal belongings are usually exempt.