The Chapter 13 Discharge
The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge.
A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: certifies that all domestic support obligations that came due prior to making such certification have been paid has not received a discharge in a prior case filed within a certain time frame and has completed an approved course in financial management . 11 U.S.C. Â§ 1328. The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtorâs homestead exemption. 11 U.S.C. Â§ 1328.
The discharge releases the debtor from all debts provided for by the plan or disallowed , with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.
A Chapter 13 bankruptcy requires repayment to creditors using a three- or five-year repayment plan.
This means you must have enough income to pay creditors every month. You must:
What Effect Does Bankruptcy Have On Credit
Your credit score is affected by missed payments and large balances. Therefore, you may need to file bankruptcy if your credit is not in good standing. However, a bankruptcy will negatively impact your credit score and creditworthiness throughout your entire life.
The effect will diminish as time goes by. For example, Chapter 7 bankruptcy can remain on your file for as long as ten years while Chapter 13 bankruptcy can be kept on your file for as long as seven years.
Your credit situation may not be perfect, but you can still take advantage of the extra time to manage your obligations and make timely payments. You can fix your credit with patience and effort. Also, bankruptcy can provide debt relief to help you get back on your feet financially.
What Are The Considerations For Filling Bankruptcy In North Carolina
In your initial consultation with one of our attorneys, we will evaluate your situation to determine whether Chapter 7 or Chapter 13 is the best option for you. We will review information about your income, assets, expenses, and debts.
We will help you gather a list of your creditors and the amounts owed, information about your income, a list of your property, and a detailed accounting of your monthly living expenses. The goal of an initial case assessment is to conduct a thorough review of your situation and help you plan how you will move forward.
Three Significant Differences Between Chapter 7 Bankruptcy And Chapter 13 Bankruptcy :
- Chapter 13 bankruptcy has no income limitations, but certain income limits are put in place for those seeking Chapter 7 bankruptcy protection.
- An approved Chapter 7 bankruptcy plan eliminates many forms of unsecured debt, while Chapter 13 bankruptcy sets up a repayment plan.
Many other differences exist, and the Columbus, Ohio-based Chapter 7 bankruptcy attorneys with the Calig Law Firm discuss several below. You can have all your questions answered, and get help with your bankruptcy case, by calling us as 252-2300. We also take appointments for consultations online through this contact form.
Helping You To Decide Whether Chapter 7 Or Chapter 13 Is Best For You
No part of the Bankruptcy Code prohibits a debtor from exercising the right to file Chapter 13, even though they qualify to file a Chapter 7. Public policy provisions encourage, rather than discourage, Chapter 13 cases. By enacting the Bankruptcy Abuse Prevention and Consumer Prevention Act of 2005 , Congress clearly indicated its intent for debtors who could repay a portion of their debts to file a Chapter 13 rather than a Chapter 7. Many of the BAPCPA amendments were designed to steer debtors to Chapter 13, rather than a Chapter 7, as the policy driving the amendments is that of repayment of debts. This congressional intent to encourage Chapter 13s and to pay creditors has been in effect since the enactment of the Bankruptcy Reform Act of 1978, which created the Bankruptcy Code.
Is Bankruptcy The Right Choice For Me
Bankruptcy may be a necessary step if your debts have become so overwhelming that youll never catch up, given your current circumstances. But filing for bankruptcy should be a last resort after youve explored all your options. The damage to your credit can be substantial, making it hard or even impossible to get a car loan or mortgagemaybe even a job.
There are alternatives to bankruptcy you should consider first.
Bankruptcy Under Chapter 7 Vs Bankruptcy Under Chapter 11
For those who dont qualify for Chapter 13, Chapter 11 is another way out of debt. It is similar to Chapter 13 in that you can restructure your debts and negotiate a payment plan with your creditors. Although Chapter 11 is typically used by corporations, individuals also have the choice to use it. If your debts are too large for Chapter 13 bankruptcy and you dont have a reliable source of income, Chapter 11 may be your best option.
Chapter 7 bankruptcy is available to companies as well, but Chapter 13 is not. When a company files for Chapter 11, it does so with the intention of continuing operations during and after the bankruptcy. In Chapter 7, on the other hand, the companys assets are liquidated and it goes out of business.
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Chapter 13 Is Better If
you want to keep property thatÃ¢s not protected by an exemption,
youÃ¢re behind on your mortgage and want to catch up,
you have debts that canÃ¢t be discharged,
you have a car loan with a high interest rate or negative equity from a trade-in
you have multiple mortgages
you owe money to your ex-spouse from a property settlement
Of course, life isnÃ¢t always that clear cut, so itÃ¢s also important to consider the downsides when weighing your bankruptcy options.
Choosing Which Option Is Right
The choice to file a voluntary Chapter 7 or Chapter 13 is that of the qualifying debtor. The provision of the Bankruptcy Code which specifically deals with who may be a debtor in Chapter 13 is 11 U.S.C. 109. Title 11, the Bankruptcy Code, is a debtor relief statute. A myriad of reasons exist as to why a debtor may chose a Chapter 13 over a Chapter 7. Possible reasons include:
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How Chapter 13 Bankruptcy Works
If you have property you really want to keep, Chapter 13 bankruptcy gives you a chance. If you have sufficient income, its your best choice.
Some good news: Filing Chapter 13 can stop the foreclosure process, which can help you make up some of your overdue mortgage payments, and debt collectors can no longer come after you during the bankruptcy process.
Chapter 13 requires you to make a plan to repay all or some of your debts through a consolidated monthly payment that will be distributed to your creditors. Youll repay your debts in three to five years. How much youll repay depends on your income, the size and kinds of debts you have and the property you own.
Chapter 13 works for debtors who are in arrears on alimony or child support so they can catch up over three to five years or who need to catch up on house or car payments so they can keep that property.
Although the trustee doesnt sell your property in Chapter 13 bankruptcy, you must repay creditors an amount equal to the value of your nonexempt property. How much you pay depends on your income, expenses and the type of debt you owe.
Youll have to pay 100% of the bankruptcy filing fees, trustee commissions and your bankruptcy attorneys fees, as well as 100% of your arrears in child and spousal support most tax debts wages, salaries, or commissions owed to employees and contributions owed to an employee benefit fund.
Impact On Credit History
A Chapter 7 bankruptcy stays on an individuals credit report for 10 years from the fate of filing
A record of Chapter 13 bankruptcy stays on an individuals for up to 7 years. You may apply for new credit cards after 12-24 months, a new FHA mortgage loan 24 months after discharge, and a new Fannie Mae and Freddie Mac loan after 36 months.
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Talk To A Knowledgeable Bankruptcy Chapter 7 And Chapter 13 Attorney In Cary Nc
At the Sasser Law Firm, you will work directly with a knowledgeable attorney to determine
the best way to resolve your financial difficulties. We pride ourselves on giving straightforward and honest legal advice about personal and business bankruptcies under Chapter 7, Chapter 13, and other provisions of the Bankruptcy Code.
Dont let a financial problem grow worse when help is available. Schedule a free consultation with our compassionate consumer bankruptcy attorneys in Cary, NC today. The Sasser Law Firm serves individuals and businesses throughout North Carolina, including in Wake, Harnett, Johnston, Durham, Orange, Granville, Vance, Franklin, Warren, Nash, Lee, Chatham, and Moore counties.
When Does It Make Sense To File A Chapter 13 Bankruptcy Rather Than A Chapter 7 Bankruptcy
All things being equal, it is more advantageous to debtors to wipe out all of their dischargeable debts immediately through a Chapter 7 bankruptcy than to repay some or all of the debt over the course of 3 to 5 years through a Chapter 13 bankruptcy. However, there some scenarios where a Chapter 13 bankruptcy is the best option:
Chapter 7 cases may be converted to Chapter 13 cases if the debtorâs situation changes or information is discovered that would make a Chapter 13 case more appropriate for the debtorâs situation.
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What To Expect In Your Bankruptcy Filing
Bankruptcy filing is a complex process, and any errors made during the initial phase of your bankruptcy case can significantly increase the time required for the bankruptcy case to unfold. An experienced attorney will be invaluable as you begin the bankruptcy filing process. They will help you gather the documentation you will need to provide to the bankruptcy court and prepare you for each stage of your case.
The first phase of filing for bankruptcy is the initial petition. Once you file for bankruptcy, an automatic stay is placed on your assets and property that will prevent creditors from continuing with their collection efforts. This alone can be a major relief, especially if you have dealt with repeated calls and other collection efforts for months. However, the initial filing is only the first step in securing bankruptcy status.
Chapter 7 Vs Chapter 13
When deciding between Chapter 7 vs. Chapter 13 bankruptcy, itâs important to consider:
the types of debt you have ,
if any of your personal property would be considered a nonexempt asset,
if your regular monthly income is enough to cover your living expenses, and
the difference between Chapter 7 and Chapter 13 on your credit report
Bankruptcy can be a powerful poverty fighting tool and help thousands of families get back on their feet every month. If youâre facing wage garnishment, know the Bankruptcy Codeâs âautomatic stayâ protects you from any future garnishment as soon as your case is filed. If youâre not sure whether bankruptcy is right for you, keep doing what youâre doing and research. You may even consider signing up for a free credit counseling session to learn more.
Donât be discouraged – or embarrassed – by the idea of filing bankruptcy. If COVID-19 and its impact on everyone in the United States and around the world has shown us anything, it’s that life happens. Bankruptcy laws exist to give you a fresh start. Thereâs no shame in using this legal tool, just like Walt Disney, Abraham Lincoln, and Henry Ford did when they needed help.
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Power Over Special Unsecured Creditors
There are certain types of debt that are not discharged in bankruptcy, such as recent income taxes, all child and spousal support, student loans, and a few others. Under Chapter 7, if you have any of these debts, you need to deal with them after your case is finished.
This may be fine if the surviving debt is relatively small and discharging your other debts has made dealing with it manageable. Additionally, many types of unsecured debts are discharged under Chapter 7 bankruptcy. These include medical debt and .
Under Chapter 13, you can arrange to pay those kinds of special debts through a court-approved repayment plan which usually gives you more control, is based on what you can afford, and protects you from all your creditors throughout the process.
This continued protection can be especially important because otherwise, the law tends to give these kinds of creditors extraordinarily aggressive collection powers. Also, in some casessuch as income taxesyou will be able to pay less by avoiding ongoing interest and penalties.
Other Ways Chapter 7 Bankruptcy Differs From Chapter 13 Bankruptcy
- You can only file for Chapter 7 bankruptcy protection once every eight years. On the other hand, you can file a new Chapter 13 bankruptcy petition as often as you need to do so.
- A Chapter 7 bankruptcy petition discharges credit card debt, medical bills, and unsecured personal loans. A Chapter 13 bankruptcy requires a portion of those obligations to be paid back.
- If your mortgage is current, you will be able to keep your home in a Chapter 7 or Chapter 13. However, if the mortgage is behind, the court will only allow you to keep the home in a Chapter 13.
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Why Should I File A Chapter 13 Instead Of A Chapter 7 Bankruptcy
You may like to file Chapter 13 instead of a Chapter 7 bankruptcy, if you’re behind on your mortgage payments and you’re trying to save your home. Chapter 7 does not give you the opportunity to catch up mortgage payments or otherwise save your house. A Chapter 13 would be the appropriate chapter to file for that. Also, some individuals just have too much income and don’t qualify for a Chapter 7. In that case, you would need to file a Chapter 13 reorganization.
There are two ways that people generally file bankruptcy: Chapter 7 and Chapter 13. Both methods are court-directed ways to reset your debt. Which version of bankruptcy to file is a big question and will affect how your debts are considered by the court and what you will be required to pay back. To understand how bankruptcy affects debt, you need to understand debt.
Debts are born from contracts that you enter into with a lender where you receive money for your promise to pay it back with interest . Contracts contain terms which include how long you have to pay your debt back, and at what interest, and what happens if you do not pay it back.
The court will gather any assets from you not protected under bankruptcy exemptions and use those assets to repay the creditors, often at a rate of pennies on the dollar. At the end of Chapter 7, you do not personally owe any of the debts included in bankruptcy.
Saving Your Property
When Should I File For Chapter 7 Or Chapter 13 Bankruptcy
Some things bear repeating: There are consequences of bankruptcy, so consider your options carefully. If its affordable, consult with an attorney. Between court fees and attorney fees, the cost of bankruptcy can be thousands of dollars.
Of the two options, Chapter 7 is more popular because filers dont have to pay back part of their debts. Chapter 13 may be a better solution if youre in arrears on your mortgage and dont want to lose your house because you will have time to get caught up. The same is true for debts like back taxes and spousal/child support, which wont go away in bankruptcy.
- What kind of debt do you have? Secured? Unsecured? Dischargeable? Non-dischargeable?
- How much of your property is non-exempt, which means it can be sold to pay off debts? Non-exempt assets are typically not necessary for your home, your job or your daily life.
- Is your regular monthly income enough to cover your living expenses?
- How important is clearing the bankruptcy from your credit report, which happens faster with Chapter 13?