CHAPTER 7

Chapter 7 is a form of consumer bankruptcy that liquidates most debts. It can help you overcome credit card debts, medical bills, deficiencies in repossessed cars or foreclosed homes, and other similar types of debts. However, not all debts are eligible for discharge such as child support, alimony, most tax debts, and student loans, are not eligible for discharge.

You can keep your original loan with any mortgage or vehicle lender in a Chapter 7 case as long as you are current on the loan. This is called reaffirming the debt, and you must continue to make regular payments on this property. If you do not want to keep the original loan but still want to keep the property then you also have the option of redeeming the property. When you redeem, you must pay the full value of the property or use a redemption company to get a new loan. Chapter 7 is the best option for many people. We can help you determine if it is the best option for you.

CHAPTER 13

Are you having trouble keeping up with your bills? Are you facing foreclosure and need help reducing your expenses to save your home? Are you being harassed by creditors by phone or having your wages reduced due to garnishment? If you do not qualify for Chapter 7 bankruptcy due to having filed a previous case less than 8 years ago, or because your income level is too high (according to the “means test”), chapter 13 may be an excellent alternative.

Chapter 13 bankruptcy may be the solution to your financial woes. Chapter 13 is a form of bankruptcy where you create a payment plan to repay your creditors at least a portion of what you owe them. This can be used to catch up on missed mortgage payments and stop a foreclosure or vehicle repossession. At Marcus H. Herbert & Associates, we are ready to help you determine if this is the right method to turn your financial situation around.

Lawsuits & Garnishments

Most creditors win their lawsuits without ever going to trial. Most of the time, the person being sued loses by default because they don’t know how to answer or simply can’t afford to hire an attorney. If you lose a lawsuit, either after trial or by default, a judgment is entered by the court against you. This allows the creditor who won the judgment to try to collect. Wage garnishments and bank garnishments are some common ways they try to do this. It can be devastating to you in trying to pay your bills when a creditor is garnishing up to 25% of your pay or seizes everything in your bank accounts. Bankruptcy can stop these garnishments.

Judgment liens

If you get sued by a business or a person that claims you own them money and they win by default or after a trial, the one who sued you (called the “judgment creditor”) can record a document in the county land records which automatically creates a lien on any land you presently own. The recorded judgment lien also attaches to property you might acquire in the future. If this happens, bankruptcy allows you to remove that lien on your property. Make sure you have an experienced attorney and make sure you tell your attorney about it. If your attorney does not know about it, the problem is not automatically fixed. Show the attorney a copy of the judgment lien.

Foreclosure

Foreclosure is a type of suit where a creditor sues to force a sale of land to recover money owed for an unpaid mortgage, taxes, or some other claim against the real estate. A Chapter 13 bankruptcy can stop the foreclosure and give you time to catch up on the debt, allowing you to keep the property. If you don’t want to keep the property and you don’t want to owe the creditor more money after the property is sold, a Chapter 7 or Chapter 13 bankruptcy can reduce or eliminate your obligation to pay any deficiency balance after the sale.

Personal Loans

This term usually covers a promise you made to pay back a loan for which you just signed a promise to pay without pledging any collateral. These are often made by finance companies and tend to have very high-interest rates. This type of debt can be wiped out in a Chapter 7 bankruptcy or refinanced to a lower payment and lower interest in a Chapter 13 repayment plan.

Repossession

If you fail to make your payments on a car, motorcycle, boat, or other loan secured by personal property, the creditor can repossess the item and sell it. If it does not sell for enough to pay off the debt, the creditor can sue you for the deficiency. If you want to get the item back, one option is to file a Chapter 13 bankruptcy before they sell the item, typically within 10 days. In a Chapter 13 case, you can get a court order allowing you to restructure the payments over three to five years and lower your interest rate. By filing for bankruptcy protection, the creditor would have to let you have the vehicle back and give you another chance to pay for it through the new court-approved plan.

Medical Bills

Many people are just barely keeping their heads above water living paycheck to paycheck. If a large medical bill comes along and insurance only pays part of it, or worse yet, if you don’t have insurance, you can be pushed into insolvency by such bills. Insolvency means that you have more total debt than you have funds to make the payments with. Bankruptcy gives you a chance to wipe the slate clean and get a fresh start free of past medical bills.

Credit Card Debt

Credit card debt can be wiped out by a Chapter 7 “Order of Discharge” or paid back at a lowered amount with no interest in a Chapter 13 case. Make sure not to rack up a lot of new credit card debt in the few months before filing for relief of bankruptcy. Creditors can challenge any case that appears has been filed in bad faith.

Back Taxes

Some taxes can be wiped out in bankruptcy, others cannot. You need a knowledgeable bankruptcy attorney to know the difference. If your taxes cannot be wiped out, they can be repaid through a Chapter 13 repayment plan over a period up to five years long with no late fees, penalties, or interest added once the bankruptcy is filed. Make sure to tell your attorney about taxes you owe.

Child Support Arrears

Child support and alimony cannot be wiped out in a Chapter 7 or Chapter 13 bankruptcy. However, it can be repaid through a Chapter 13 repayment plan that would keep you from being held in contempt of court as long as you keep current on your Chapter 13 plan payments. Make sure to let your bankruptcy attorney know about any child support and alimony or other divorce-related debt you owe. Bring a copy of the court documents and a printout of the current total owed.

Missed Mortgage Payments

If you miss any mortgage payments or only make partial mortgage payments, this is a default on your mortgage. The default gives the mortgage company the legal right to bring a foreclosure suit to take the property and sell it. Sometimes bankruptcy will help you stretch your dollars so you can once again afford to make your mortgage payments. By getting rid of unsecured debts like credit cards and medical bills, you can free up money that you can use to pay for your mortgage.