Cleveland and Cuyahoga County (216) 696-7449
Lake and Geauga Counties (440) 352-4687
There is hope for those suffering from severe financial difficulties. Chapter 7 and Chapter 13 bankruptcies enable individuals to solve their debt problems and get a "fresh start" in life. This article will provide a brief overview of these programs.
Whether or not you should declare bankruptcy depends on the particular circumstances of your financial situation. It may very well be that, after consultation with an attorney, you can resolve your problems through means less drastic than bankruptcy. Bankruptcy, however, may be a necessary step for overwhelmed individuals. The decision should never be made without consulting an attorney.
There are two types of bankruptcy proceedings that help individuals get out of debt. The first type of case is Chapter 7, commonly known as a “Straight Bankruptcy.” In this type of proceeding, you get a fresh start in life because most or all of your bills are discharged or wiped out.
The other type of case is a “Chapter 13”, or what is also known as a “Debt Repayment” program. Chapter 13 permits you to consolidate your bills and pay them off over a period, at a rate you can afford, without creditor harassment, wage garnishments, and the like. A major benefit of Chapter 13 is that it stops foreclosure and other court proceedings, deals with income tax problems and permits you to bring your mortgage current. Everyone, including the mortgage company and governmental entities, such as the Internal Revenue Service, must abide by the provisions of the court-approved repayment plan.
Yes. When you file Chapter 7 or Chapter 13, your creditors must stop all collection efforts. They must cease, for example, telephoning you at home or at the job, sending threatening letters, and garnishing your wages. They must also, at least temporarily, stop attempts at repossessing your car or furniture.
The most common form of bankruptcy is what is known as a "straight" or Chapter 7 bankruptcy. In a Chapter 7, most or all of your debts are discharged or eliminated. This includes, for example, medical bills, most bank loans, credit card debt, utility bills, credit union debt, and most finance company obligations.
Sometimes, however, a debt is secured by a lien on collateral such as your home, car, furniture, or bank account. That is, the creditor retained the right to repossess the collateral if you don’t pay. If you wish to keep this item, you must enter into a new agreement with the creditor whereby you agree to pay them, and they agree to let you keep the item. Such an agreement is called a "reaffirmation" agreement, and it survives the bankruptcy. Your attorney will help you with reaffirmation agreements. If you don’t enter into a reaffirmation agreement with the creditor, you usually have to return the collateral to the creditor.
Certain other debts, such as alimony and child support, taxes, and student loans, may not be dischargeable in a Chapter 7. Because the law in this area is very complicated, it is always wise to consult an attorney to determine which of your bills will be discharged, and whether Chapter 7 is the appropriate program for you.
No. You may usually keep certain property such as your home, car, clothing, furniture, tools of your trade, and limited amounts of cash without fear of having to turn over this property to the Bankruptcy Trustee liquidation and distribution of sale proceeds to your creditors. Such property is known as “exempt" property”.
Whether your property is exempt depends, in large part, on the value of the property, and if it is pledged as collateral to one of your creditors. Non-exempt property is liquidated by the Bankruptcy Trustee and the proceeds distributed to your creditors.
It must be kept in mind that if your property is pledged as collateral to one of your creditors and you enter into a reaffirmation agreement, you must continue to make payments to that particular creditor to avoid foreclosure or repossession.
This is a complicated area of the law. Your attorney will talk to you about your particular situation, will tell you which of your property is exempt, and which is not. The attorney will also talk to you in detail about what happens if the property has a lien on your property and your options.
A Chapter 13 permits you to consolidate your bills and pay them off over a period of time, without creditor harassment. While you are paying your bills, your creditors may not contact you, garnish your wages, or otherwise bother you. If you qualify for a Chapter 13, you can bring your house note current, even if a foreclosure has been filed. To take advantage of Chapter 13, you must have a regular and steady income. You may file Chapter 13 even if you recently filed a Chapter 7 bankruptcy.
No. None of your assets or property is taken by the Chapter 13 Trustee or the Bankruptcy Court. Chapter 13 permits you to consolidate your bills and pay them off with dignity and without creditor harassment.
In many cases, yes. The filing of Chapter 13 will stop foreclosure proceedings. If you are behind in your house payments, Chapter 13 will enable you to bring your mortgage current. As part of your Chapter 13 Plan, you can make payments upon the mortgage arrearage while making the current monthly mortgage payment. Thus, if you are behind in your mortgage payments, you should contact an attorney to learn if you are eligible to file a Chapter 13, and about how it can help save your home from foreclosure.
If you are in a severe financial situation, the first thing to do is contact an attorney. You must provide complete information to the attorney so that the attorney can give you appropriate advice. You should bring with you to the meeting with the lawyer the following information:
Completeness is essential. Any debt owed to a creditor not listed in your bankruptcy filings is not discharged. As a bankruptcy debtor, you must swear that your filed bankruptcy documents contain a complete listing of debts. By reviewing all your financial information, your attorney can advise you as to whether you should declare bankruptcy and, if so, what kind of bankruptcy to file.
This article is intended to be used as a general information source, and does not constitute legal advice. Consult with us to learn how to get out of debt and deal with your debt problems. There is no cost for the initial consultation with us. We will discuss with you available options for solving your debt problems. The attorney will also give you more detail about how the programs work. You will speak directly with the attorney, and not office staff. We have two (2) offices to server you.