Understanding All About Bankruptcy

By : Andrew Shultz    29 or more times read
Submitted 2009-12-09 13:13:56
Bankruptcy is a way for people who owe more money than they can pay right now, to either work out a plan to repay the money over time, under Chapter 13, or for most of the bills to be wiped out ("discharged"), under Chapter 7. While the details are being worked out, creditors must stop all collection efforts against the debtor.

Remember, Bankruptcy is a court-based process that is meant to give people a financial "fresh start" from burdensome debts. Once the bankruptcy process is complete, the filer is typically released from personal liability for most debts. Bankruptcy also allows creditors who are owed money a chance to get their designated share of any money the debtors can afford to, or are obligated to, pay back.

What are the Different Types of Bankruptcy?
Chapter 7 cases are commonly referred to as "straight bankruptcy" or "liquidation" cases. Under Chapter 7, a trustee is appointed to collect and sell all property that is not exempt and to use any proceeds to pay creditors. The debtor is allowed to claim certain property exempt. In exchange for this, the debtor gets a discharge, which means that the debtor does not have to pay most types of debts.

Chapter 13 is the debt repayment chapter for individuals with regular income whose debts do not exceed $1,000,000 ($250,000 in unsecured debts and $750,000 in secured debts). Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future income. Each chapter 13 debtor proposes a repayment plan which must be approved by the court. The amounts set forth in the plan must be paid to the chapter 13 trustee who distributes the funds for a small fee. Many debts that cannot be discharged can still be paid over time in a chapter 13 plan. After completion of payments under the plan, chapter 13 debtors receive a discharge of most debts.

What Happens After I File My Chapter 13 Bankruptcy?
Many of people ask what they can expect once we file their Chapter 13 Bankruptcy. Of course, every case is different in detail, but the following things occur in each Chapter 13 case once it is filed:

  • Once your case is filed, you'll be assigned a DebtStoppers bankruptcy attorney who will be familiar with all aspects of your case. This attorney will present your case to the bankruptcy court for approval.

  • Your creditors are now prohibited from contacting you directly. This prohibition is called the "automatic stay." While the court will send notice of the stay to all of your creditors, this could take several days. So if you're in danger of having a car repossessed, your wages garnished or you're concerned with any collection activity, call your creditor with your bankruptcy case number. That will stop the collection. You should also fax the creditor a copy of the restraining order.

  • The first full payment in your Chapter 13 payment plan is due within 30 days of your filing date. While your payments will be deducted automatically from your paycheck, automatic deduction may not be set up before the first payment is due. So you need to send the scheduled payment directly to the trustee until you see that the payments are being de-ducted from your wages.

  • If you have a mortgage, you're responsible for making your morgage payments as they become due. This is true even if the mortgage company has stopped sending you statements.

  • The moment you file your Chapter 13, you're deemed current with your creditors. So you want to be sure and stay current in order to preserve your fresh start.

  • 30 days after we file your case, there will be a meeting of your creditors at the trustee's office. You are required to attend this meeting in order to complete your Chapter 13 plan. You will need to bring with you
    Photo ID
    A Social Security Card
    A recent pay stub




Author Resource:- Andrew Shultz regularly writes for financial print publications and online portals. He has been a vocal advocate of consumer rights protecting consumer interests in financial products and services.

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