What Is Bankruptcy?

Chapter 7 Bankruptcy and Chapter 13 are legal proceedings that are available to a person to cope with a financial crisis. Under the protection of Chapter 7 or 13 Bankruptcy, NO ONE CAN CALL, WRITE, COMMUNICATE, FORCLOSE, OR BRING ANY LEGAL ACTION AGAINST THE DEBTOR(S) REGARDING ANY OF THEIR DEBTS. One of the main purposes of our bankruptcy law is to allow someone, who is hopelessly burdened with debt, to free himself of the debt and start fresh - "a new lease on life." Protection under Chapter 13 and Chapter 7 Bankruptcy allows a person to focus on the important things in life after a tragic incident like the unexpected death of a spouse or sudden illness.

REMEMBER: DON'T LISTEN TO YOUR CREDITORS AND DON'T GET ADVICE FROM FAMILY AND FRIENDS ABOUT BANKRUPTCY. LISTEN TO YOUR BANKRUPTCY ATTORNEY

There are two basic types of personal Bankruptcy proceedings. A filing under Chapter 7 is commonly used to discharge unsecured debt, while continuing to pay your mortgage, car payments and other secured debts. Your bankruptcy attorney will ensure that you don't lose any property that you desire to keep. There are limits on the types of property and amount of equity you may keep under a Chapter 7.

Bankruptcy proceedings under Chapter 13 (bill consolidation remedy or the "age earner plan") involve the consolidation of the debtor(s) debts into one (1) manageable monthly payment. The monthly payment depends on the type of debts being maintained or discharged. Generally the monthly payment is composed of a twenty-five (25%) dividend of the unsecured debts and one-hundred (100%) of the secured debts. A Chapter 13 filing allows the rehabilitation of the debtor by allowing him or her to use future earnings to pay off creditors. Under Chapter 7 and 13 proceedings, a trustee is appointed to supervise the assets of the debtor.

Most bankruptcy proceedings are entered into voluntarily by a debtor(s) and can be used as a financial tool to allow the debtor(s) to get on with life and manage their financial affairs in a structured and productive manner. After the debtor files bankruptcy, creditors cannot try to collect their debts outside of the proceeding. The debtor is not allowed to transfer property that has been declared part of the bankruptcy estate.

What Is Chapter 13 And When Can It Be Used?

Individuals may file chapter 13 bankruptcy petitions if they:

  1. Reside, have a domicile, a place of business, or property in the United States, or a municipality;
  2. Have a source of regular income; and on the date the petition is filed owe less than $290,525 in unsecured debts and less than $871,550 in secured debts. Note: The amounts given here are 2001 amounts. They are regularly adjusted to keep up with the cost of living.

Corporations and partnerships may not file a chapter 13 bankruptcy petition.

If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition.

There are different legal definitions for different financial obligations:

Secured Debt refers to a loan where the creditor retains the right to repossession of an item, such as real or personal property, like a home or automobile. This security interest may mitigate the lender's losses or damages. You could remain liable for any deficient balance owed after this property has been repossessed and sold.

An Unsecured Debt generally enables you to obtain goods or services on credit in exchange for your promise to pay that creditor back. Such is the case with credit cards and personal loans. In these instances, the lender's recourse is generally legal action.

Non-exempt Debts are generally debts owed for student loans, state and federal taxes, child support, alimony and criminal judgements. These debts are generally not discharged in a Chapter 7 or 13 Bankruptcy proceeding.

If you need relief from harassing creditors, Rowland & Yauger invite you to contact our office for a free consultation to learn how we can assist you in handling this matter. Contact us or call our office at 910-947-2280 or toll free at 910-722-9717.