The biggest difference between Chapter 7 and 13 bankruptcy is that Chapter 7 allows the debtor to begin a "fresh start." In other words, Chapter 7 relieves the debtor of having to pay most of his or her debts with certain exceptions. Thus, all unsecured debts including credit cards bills will be discharged without having to make any payments. However, to qualify for Chapter 7, debts must pass the Means Test. In most situations, we recommend filing Chapter 7 bankruptcy if a person qualifies under the Means Test.
On the other hand, in a Chapter 13 case, the debtor to undergo financial reorganization (repayment plan) to discharge the debts. This type of bankruptcy is typically for individuals who are behind on home mortgage payments and when the bank is about to proceed with foreclosure proceedings. In Chapter 13 cases, the debtor will usually have to pay a portion of all his or her debts but not all of it. Thus, Chapter 13 will allow you to discharge unsecured debts to a certain extent. Unlike Chapter 7, Chapter 13 debtors do not have to satisfy the Mean Test.
Here are the some common myths we hear about bankruptcy:
(1) Bankruptcy filers are financially irresponsible. In many instances, the debtors are honest and hard-working individuals who run into very serious personal problems. These problems range from hospital bills, losing a job, and going through a divorce. This is in addition to the economic crisis in the United States. In 2011, the Centers of Disease Control and Prevention found that 20% of Americans were having trouble paying medical bills alone in addition to the 5.2% millions of Americans unemployed.
(2) Bankruptcy will ruin your credit. In most cases, debtors already have bad or worsening credit when deciding to file bankruptcy. Thus, by filing bankruptcy, many debtors will receive higher credit scores soon after bankruptcy. Without any additional debts, debtors can afford his or her payments and thereby increase his or her credit scores soon after bankruptcy.
(3) Everyone will know that you filed bankruptcy. Unless you're celebrity or a major corporation, it is most likely that the only people who will know about your bankruptcy filing are your creditors. While bankruptcy is public records to a certain extent, in our experience, it is unlikely that someone will hear about your bankruptcy unless they actively attempt to track information about you or if you tell them.
(4) You can file bankruptcy only once. A debtor can file Chapter 7 Bankruptcy every 8 years and there is no restriction for Chapter 13 Bankruptcy. Hopefully, you won't need to file bankruptcy more than once.
Chapter 7 - $306.00
Chapter 13- $281.00
The Automatic Stay is the most powerful bankruptcy protection provided to debtors. The Automatic Stay prevents any creditors from commencing or continuing any debt collection activity; including but not limited to, preventing any filings of judicial proceedings against you, stopping garnishments, repossessions, and foreclosure proceedings, and prohibiting most contact with the you from collections activity. The Automatic Stay goes into effect immediately after you file for bankruptcy protection (Chapter 7 or 13).
However, there are certain exceptions from the Automatic Stay that bankruptcy will not help you with. This includes collection of child support or alimony and tax audit proceedings with the IRS.
Avoid excessively using your credit cards or applying for new loans. Large purchases on credit cards or new loans within 90 days before filing bankruptcy can raise a legal presumption that such actions were fraudulent and therefore, non-dischargeable debts.
Do not repay debts or transfer money to family members, friends, or business associates. Bankruptcy law allows the Trustee to avoid "preferential" transfers made to family members, friends, or business associates within one year of filing bankruptcy. In such cases, the Trustee will be allowed to recover the "preferential" transfers and distribute it to the other creditors.
Do not cash out your retirement savings accounts. Bankruptcy law protects 401(k) savings accounts and IRA accounts and exempts these accounts from the bankruptcy estate. There is no reason to pull money from your retirement savings accounts.
Do not give or gift anything of value to anyone else. Under the Bankruptcy Code, the Trustee can avoid transfers made with the actual intent to defraud creditors or constructive intent to defraud creditors. Constructive fraud occurs when the debtor receives less than reasonably equivalent value and the debtors was insolvent at the time of transfer. If such transfers occur, the Trustee can recover the property from the person who received the item.
In a typical bankruptcy case, the Automatic Stay is enforced immediately upon filing bankruptcy. This prevents creditors from pursuing or continuing to purse any collection activities. About a week after filing, the bankruptcy court will send a Notice of the Section 341 Meeting of Creditors. The Section 341 Meeting of Creditors is where the Trustee will ask the debtors several questions under oath. This usually takes place approximately 30 days after the bankruptcy petition is filed in Chapter 7 cases and approximately 60 days in Chapter 13 cases.
At the 341 Meeting of Creditors, all creditors listed in the bankruptcy petition are allowed to attend. However, in the vast majority of cases, the creditors do not frequently attend. In most cases, the Trustee, the debtor, and the debtor's attorney will attend the meeting. The Trustee will ask several questions under oath relating to any income, expenses, past transfers among other items. This Meeting of Creditors usually last only 5 to 10 minutes.
We will attend the 341 Meeting of Creditors with you so any fear or apprehension will be minimal at the meeting. One of the most satisfying moments in us representing you is when the 341 Meeting of Creditor ends and seeing a weight being lifted over your shoulders.
You can file Chapter 7 bankruptcy every eight (8) years. However, you can file for Chapter 13 protection only after four (4) years after you got your Chapter 7 discharge. If you had previously filed for Chapter 13 bankruptcy, you can file a second Chapter 13 after two (2) years OR you can file for Chapter 7 protection after six (6) years. The relevant date is the date of filing and not the date of discharge. Please contact us to determine your eligibility.
To qualify for Chapter 7, a person must be able to pass the Means Test. The purpose of the Means Test is to prevent persons who can afford to payoff his or her debtors from filing Chapter 7. Essentially, the Means Test requires the debtor to show that his necessary monthly expenses exceed or are equal to his or her monthly income. The Means Test requires several steps and specific information tailored to each person, so please contact us to determine whether you are eligible for Chapter 7 bankruptcy.
The Bankruptcy Code allows individuals to keep certain property that are exempt from the bankruptcy estate. The Bankruptcy Code allows for states to create its own exemptions. Accordingly, the State of Oklahoma has enacted its own bankruptcy exemptions which provides generous exemptions for Oklahoma residents. Oklahoma exemptions include a Homestead, an Automobile not to exceed $7,500, all household furnishings (including furniture and TV's), among other items. Oklahoma exemptions include:
In bankruptcy, it is important to differentiate between secured and unsecured debt because the two types of debts are treated extremely differently. Secured debt is debt where there is collateral (real or personal property) attached to the loan. Common examples of secured debt include a home mortgage and auto loan. Your house is collateral for the home mortgage and your car is collateral for the auto loan.
On the other hand, unsecured debt is debt is when there is no security or collateral pledged for the loan. The most common example of a unsecured loan is credit cards. Please note that not all credit cards are unsecured debt; for example, several stores offer in-store credit cards where the store attaches the items that you bought as collateral for the loan.
In Chapter 7, most if not all unsecured debt is discharged with limited exemptions (child support, student loans). However, bankruptcy laws work differently with secured loans. Simply put, to keep the property that is attached to the secured loan, you have to become current on the loan and continue to pay on the loan after bankruptcy.
While Chapter 7 will discharge most debts, there are certain debts that bankruptcy will not discharge. These non-dischargeable debts include but is not limited to the following:
Generally speaking, most debtors file Chapter 13 bankruptcy because he or she does not qualify for Chapter 7 Bankruptcy under the Means Test. In some instances, debtors actively chose to file Chapter 13 Bankruptcy to keep certain property that they could not afford to keep in Chapter 7 Bankruptcy. If you have questions or concerns on which type of bankruptcy best suits your situation, please feel free to contact us for a free consultation.
Unlike Chapter 7, a Chapter 13 Bankruptcy can avoid foreclosure if it is filed prior to the sheriff sale. A mortgage loan is a secured loan because the loan is secured by the house. Simply put, to keep secured property, a debtor must become current on the loan and continue to pay on the loan during and after bankruptcy. As a result, in Chapter 7 cases where foreclosure proceedings have begun, debtors are unable to become current on his or her home mortgage and ultimately, unable to avoid foreclosure.
Fortunately in Chapter 13, debtors are allowed to pay off any arrearages on the mortgage loan over a 3 or 5 year payment plan. The debtor must continue making these payments throughout the 3 or 5 year plan and after the plan ends. However, failure to continue making these payments can result in foreclosure proceedings. If you are facing foreclosure or foreclosure proceedings have already begun, please call us for a free consultation.
Once we are able to settle your debt for a lesser amount, the credit card company will issue the Form 1099 to you at the end of the year if the debt forgiven is more than $600.00. Unfortunately, the IRS views any canceled or settled debt as taxable income unless the debtor is deemed "insolvent" at the time of debt settlement.
Our Chapter 7 Bankruptcy prices start as low as $0 zero dollars down (subject to certain requirements). We offer flexible payment arrangements with low monthly payments. Are you currently employed? Do you have a bank account? If you answered 'yes' to both questions, you may qualify for $0 down payment to file your Chapter 7 bankruptcy. If you need to quickly stop garnishments, keep your exempt property, and get a fresh start, our flexible payment arrangements may work for you. We have a policy of full disclosure at Debt Solutions, so please visit our detailed prices page for more information on our fees.
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