Archive for January, 2010
Tax Attorney Virginia Beach
Types of Personal bankruptcy
There are two basic types of personal bankruptcy, Chapter 7 and Chapter 13. The laws changed in 2005 and now certain conditions must be met before filing for bankruptcy under either chapter. As soon as you file you get immediate protection from the harassing collection efforts of your creditors. This is called an automatic stay.
There is one requirement you must meet in order to file: At your own expense you must complete a credit counseling course from a government-approved organization. See www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm.
The bankruptcy code was dramatically changed in late 2005 to encourage people to file Chapter 13 instead of Chapter 7. Chapter 13 is known as the “wage earner plan.” This chapter permits those filers with a steady income to retain certain property, like a home with a mortgage or a car that is still owed for and make monthly payments for part (in some cases all) of the debt to creditors over a 36 to 60 month period. The bankruptcy court must approve the repayment plan. Certain debts like child support and most taxes must be repaid, while car loans and home mortgage payments on cars and houses being retained must also be repaid. Some debts, like student loans, usually cannot be discharged.
Chapter 7 or “straight bankruptcy” allows you to discharge or erase most debts without any repayment. A bankruptcy trustee will collect any non-exempt property, sell it, and pay out the proceeds to your creditors. Certain debts like past due child and spousal support will not be excused and the trustee may even be able to sell property you transferred to someone else if you transferred it in an attempt to avoid losing it. There is no repayment plan to be filed with the court. Additionally, you will not be able to retain vehicles or homes if you owe debt on them unless you can pay the debt, and you may be forced to “reaffirm” (a new legally enforceable promise to pay) the debt if you wish to retain the property.
Chapter 7 and Chapter 13 filings are managed by a trustee appointed by the US Department of Justice. The trustee reviews each debtor’s filing information, disburses money to creditors through the debtor’s payments (in Chapter 13) or by selling non-exempt assets (in Chapter 7), and oversees a “meeting of creditors” about a month after a case is filed. Each bankruptcy case is assigned a judge.
A lawyer is not required and you can file by yourself, which is known as a pro se filing. However, a bankruptcy filing is complex and requires completion of a lot of paper work, so you may want an expert bankruptcy lawyer to advise you and do the filing for you.
Chapter 7 usually takes about three months to complete but the case stays on your credit report for 10 years. Chapter 13 lasts from three to five years, depending on your circumstances, and remains on your credit record for seven years from when it was filed. Before discharge of the case under either chapter, you must receive certification for a completed course in financial management from an approved counseling agency.
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