Chapter 7 Bankruptcy: You ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection, sell it, and distribute the proceeds to your creditors.
Chapter 13 Bankruptcy: You file a repayment plan with the bankruptcy court to pay back your debts over time. The amount you'll have to repay depends on how much you earn, the amount and types of debt you owe, and how much property you own. Determining which is right for you is a consideration to be discussed with your attorney.
Who Files for Bankruptcy?
The following are some surprising statistics from a recent major study of bankruptcy debtors:
44% of all bankruptcy filings.
30% are women
26% are men. Most bankruptcy filers are slightly better educated than the general population.
2 out of 3 bankruptcy filers have lost their jobs.
50% of all bankruptcy filers have experienced serious health problems.
91% of bankruptcy filers have suffered a job loss, medical crisis or divorce.
40% of bankruptcies are a result of medical crises, unemployment or divorce.
90% of filers have two car payments, a house payment and an average of $2,500 in credit card debt.
10% of filers were delinquent only 5–29 days prior to bankruptcy.
What Happens if I Just Ignore My Debts & Hope They Go Away?
When we were children, we often pretended that when we closed our eyes, it would make all bad things go away. Unfortunately, many adults choose to adopt that thinking and as a result, they get in some really bad situations.
Ignoring your credit card obligations will cause creditors to harass you via phone calls and letters from credit card companies, collection agencies and ultimately, law firms, all of whom are experts at harassment. If you ignore them, it will only make matters much worse. In fact, you can and probably will be sued by ignoring your debts. If you lose (and you will unless there’s a viable reason you didn’t pay your debts), the result is a judgment which may include penalties, interest, court fees and attorney fees. With a judgment, the creditor can collect from your wages, your property and your bank account.
Bankruptcy can stop harassing phone calls and letters. It will prevent you from all lawsuits. It even stops collection actions from judgment creditors.
What if I Prefer to Pay Certain Creditors Only?
A preference payment is a transfer of money by a debtor on an account of a pre-existing debt that is made while the debtor is insolvent. This type of payment gives the creditor more than it would receive from the debtor’s assets during a Chapter 7 bankruptcy. In other words, the debtor chooses to pay certain creditors and not others. Preference payments are considered unjust by the system and if the transaction takes place within 90 days of the bankruptcy, the bankruptcy trustee can demand recovery of the money from the creditor for equal distribution to all creditors. If the payment is made to a relative, business partner or other party who has a special relationship with a debtor, the trustee can sue the party for recovery of the payment.
When filing for bankruptcy, do not withhold any information on payments from your attorney. Also, consult with your attorney before paying any creditors.
What Property Might I Lose if I File for Bankruptcy?
You lose no property in Chapter 13, because you fund your repayment plan through your income. In Chapter 7, you select property you are eligible to keep from either a list of state exemptions or exemptions provided in the federal Bankruptcy Code.
Although state exemption laws differ, they typically allow you to keep some types of property review the examples below:
Equity in your home, called a homestead exemption. Under the Bankruptcy Code, you can exempt certain amounts of equity. Some states have no homestead exemption; others allow debtors to protect all or most of the equity in their home.
Insurance. You may get to keep the cash value of your insurance policies.
Retirement plans. Pensions which may qualify under the Employee Retirement Income Security Act (ERISA) are typically protected in bankruptcy. So are many other retirement benefits.
Personal property. You'll be able to keep most household goods, furniture, furnishings, clothing (other than furs), appliances, books and musical instruments. You may be able to keep jewelry only worth up to a certain value. Most states let you keep a vehicle if it exceeds a certain amount of equity.
Public benefits. All public benefits, such as welfare, Social Security, and unemployment insurance, are fully protected.
Tools used on your job. You'll probably be able to keep up to a few thousand dollars worth of the tools used in your trade or profession.
Please contact the Law Office of Truman Coe to discuss in detail what property is exempt.
Do I Need to Use Credit to Rebuild Credit?
YES. Reestablishing a new positive credit profile is the only way to turn an otherwise poor credit rating around. Rebuilding credit can be done two ways:
Installment Loans — These loans will help you rebuild your credit quickly. For example, if you get an installment loan to buy a car, use a subprime lender and pay your bills promptly. Additionally, make sure the lender reports these prompt payments to the credit bureaus. Paying your mortgage on time will also help you rebuild your good credit.
Revolving Accounts — These are primarily credit cards. After your bankruptcy, you will be offered accounts. Open one or two and make sure you pay the bills on time. Use these credit cards wisely and do not run up the entire amount of your limit. There are also secured credit cards that provide you the amount you deposit at the issuing bank of the card.
How Long Does it Take to Rebuild Credit?
It can take usually about 2 years, however, remember each case is different and depends how well you follow the advice you are given.
How Do I Reestablish My Credit?
After you've cleaned up your credit report, the key to rebuilding credit is to get positive information into your record. One way to help you repair your credit is if your credit report is missing accounts you pay on time, send the credit bureaus a recent account statement and copies of canceled checks showing your payment history. Ask that these be added to your report. The credit bureau doesn't have to add this information, but often will. Also, creditors like to see evidence of stability, so if any of the following information is not in your report, send it to the bureaus and ask that it be added:
Current & Previous employment (especially if you've been at your current job fewer than two years)
Current residence & telephone number (especially if it's unlisted)
Date of birth
Checking account number
Why Choose Us
Work directly with a lawyer instead of a legal assistant.
We take the headache and hard work out of bankruptcy and foreclosure by being supportive, caring, and knowledgeable.
Personalized, friendly service.
Payment plans available.
Free case evaluation (attorney will spend time over the phone and give you detailed information relevant to your situation and determine if bankruptcy is a viable option for you and schedule a free in office consultation).
Over 30 years combined experience in helping individuals wipe out debt and get a fresh start.
Top 10 Ways a Chapter 7 Bankruptcy Can Help You:
Eliminates liability for dischargeable debt, including credit card debt, repossession, mortgage back-payments, rent back-payments, utility bills, medical bills and attorney’s fees that were not incurred fraudulently.
Eliminates tax liabilities that qualify for discharge. Consult with the Law Office of Truman Coe for specifics on what qualifies for a dischargeable tax liability.
Stops creditor collections and harassment, legal proceedings to collect a debt and the shut-off of utilities.
Assists with loss of reduction of employment income. Bankruptcy can help you eliminate your legal obligation for payment of certain debts to allow you to pay your most important bills such as your mortgage or car payment.
Assists with financial difficulty caused by divorce. Bankruptcy can help with the sudden situation of a single-income household by eliminating your amount of monthly debt.
Eliminates liabilities guaranteed on behalf of a business. Small business owners are usually required to personally guarantee business liabilities. If a business fails, the creditors will attempt to secure the business owner’s assets. Bankruptcy stops the creditor’s right to personally pursue the business owner.
Protects your wages from garnishment. Filing bankruptcy stops creditors from garnishing your wages and may allow some debtors to even recover some of their wages from the creditor.
Prohibits liens against your home or property. Filing bankruptcy allows debtors to protect against creditors who put liens on your property if the bankruptcy is filed prior to successful completion of the lien.
Enables you to take control and responsibility of your liabilities. Bankruptcy helps you manage your debts in an orderly and controlled manner through court regulated proceedings.
Allows you to start over and rebuild your credit.
For more information or a free initial consultation and evaluation, please call 214.688.1393 or 817.870.1960 or fill out the Case Evaluation Form, on the home or contact page, and one of our attorneys will contact you.