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We handle all types of bankruptcy. Each type of bankruptcy is designed to help different types of individuals file for relief under the bankruptcy code. One major advantage to bankruptcy law is that upon the filing of your petition, all creditors' actions regarding the collection of debts are halted, or "stayed." This means creditors can no longer call you or write you harassing letters and must stop garnishing your paychecks. Oftentimes we can even get your garnishment money back by filing Bankruptcy. Bankruptcy also causes foreclosures to stop, at least temporarily. Further, some chapters of the Bankruptcy code allow a debtor to cure the default and halt the foreclosure action permanently. Lepant Law Office, PC, LLO, assess your situation and counsel you as to your best course of action if you are having trouble paying your creditors. There are certain eligibility requirements you must meet to file Bankruptcy. Some requirements have to do with your income, preconditions you must meet to file and timing in the case of multiple filings. Other requirements are more subjective. Bankruptcy is a complicated area of law, so it is best to consult with an attorney regarding your individual circumstance.
Some general rules are:
- All individual debtors must undergo credit counseling within 180 days prior to filing bankruptcy. This can be done conveniently at our office or in the comfort of your own home; and
- If you have previously filed for bankruptcy, there are certain restrictions on when you can file again. If you previously filed for a Chapter 7 bankruptcy, you must wait 8 years to file another Chapter 7 or 4 years to file a Chapter 13 from the date of filing your original Chapter 7. If you previously filed for a Chapter 13 bankruptcy, you must wait 2 years to file another Chapter 13 or 6 years to file a Chapter 7 from the date of filing your original Chapter 13.
There are some common misconceptions about bankruptcy.
- You cannot file bankruptcy only on certain creditors. If you file bankruptcy, you must disclose all creditors to the bankruptcy court and all your creditors must be notified that you have filed.
- There is no such filing as a "medical bankruptcy." Although many people who file for bankruptcy often do so after incurring substantial medical debt, one cannot file bankruptcy against certain creditors holding only medical debt.
- You will not be able to keep any of your credit cards after filing bankruptcy. You must disclose all debts to the bankruptcy court and your creditors. Even if you fail to do so, credit card companies will find out that you have filed and will not extend any more credit even if you have a zero balance.
- You do not have to file bankruptcy if your spouse is filing, but it may be beneficial to do so. We suggest both spouses consult with our Attorneys to ensure your best interests are being met. To find out if your spouse should file bankruptcy click here.
What Are The Different Types Of Bankruptcy?
A chapter 7 bankruptcy is the most basic form of bankruptcy. It is commonly referred to as "liquidation." Both business entities and individuals may file for Chapter 7. In a Chapter 7, a trustee collects the assets you own that are not exempt under state statute and are unencumbered by liens and converts these assets into cash. This cash goes to your creditors in order of priority determined by the Bankruptcy Code in full satisfaction of your debts. The difference between what you owe and what you have paid your creditors in liquidation is usually discharged. Some debts, however, are not dischargeable. Most of your basic living needs are exempt from this liquidation process, including residences and vehicles, depending on the equity you have in the property. One consideration is whether you have a home encumbered by a mortgage. If you are behind on the mortgage, you could lose your home under a Chapter 7 because your lender will unlikely let you "reaffirm" the debt. If you have too much equity in your home, you may also be unable to keep your home because it may not be exempt. If you are current in your payments and you don’t have too much equity in your home, then it may be possible to keep your residence in a Chapter 7 bankruptcy.
Many people refer to a Chapter 13 as a "debt consolidation bankruptcy". The principal goal of a Chapter 13 is to provide you the opportunity to keep your assets rather than let them be liquidated (as in a Chapter 7) by paying your secured creditors over a period of three to five years. In a Chapter 13 bankruptcy, most debtors are not required to pay any of their unsecured debt. In a Chapter 13, you must have some form of regular income to make plan payments. The chief reasons you may want to file a Chapter 13 rather than a Chapter 7 are the following:
- You are not eligible for a Chapter 7 either because of your income level or because you have filed a Chapter 7 in the past eight years;
- You are behind on your mortgage payments and you want to keep your house;
- You are behind on your vehicle payments and you want to keep your vehicles; and/or
- You can't afford to pay all of the attorney fees in advance for a Chapter 7.
In fact, many Chapter 13 debtors’ payments just cover the attorney fees and trustee fees.
Bankruptcy under Chapter 12 is available to family farmers with regular annual income. The term "family farmer" only applies to certain individuals, depending on the level of income derived from farming. Like Chapter 13, Chapter 12 involves the repayment of certain debts, via a payment plan lasting five years. The two major advantages of filing a Chapter 12 are that debts may be re-amortized to provide lower payments and capital gains taxes from sale of land and equipment are treated as general unsecured debts that only have to be paid if the family farmer has enough equity in property.
Chapter 11 is most commonly utilized by business entities such as corporations or LLCs to reorganize rather than liquidate under Chapter 7. Some individuals with debt above the limits imposed in a Chapter 13 are required to file Chapter 11. In a Chapter 11, a business continues to operate pursuant to the provisions contained in the Plan. Chapter 13 is expensive due to much higher attorney fees, trustee fees and court costs. Consequently, a business must have a good business plan and a reasonable opportunity for success to consider filing a Chapter 11. Nevertheless, some businesses file a Chapter 11 for a certain specific purpose and once that purpose is accomplished, they dismiss the Chapter 11 or convert it to a Chapter 7.