Bankruptcy

Bankruptcy is a process individuals or businesses can undertake to eliminate certain types of debt. It is a federal court proceeding designed to help with both debt elimination and debt repayment. Bankruptcies generally fall under two categories: reorganization and liquidation and our bankruptcy lawyers are well-versed in both types. The reorganization method is used to do just what the name implies; it reorganize the debts you owe and puts a payment plan in place that will allow you to become debt free over the course of three to five years. Liquidation eliminates debts by giving the collectors the ability to liquidate, or sell, certain assets to amend what you owe them.

A secured debt is backed with some sort of collateral. This collateral reduces the risk of the debt for the lender and often comes in the form of property loans. A mortgage, for instance, would be a secured debt with the house acting as the collateral. Were you to default on your mortgage payment, the house could be seized and the lender could, in that way, recover his or her investment.

Both Chapter 7 and Chapter 13 bankruptcy can be used to assist with these types of debts. Chapter 7 gives you the option of allowing for repossession, continuation of payments, or paying the creditor a lump sum. Chapter 13 allows you to make up any missing payments in order to prevent repossession or foreclosure.

This type of debt does not have a piece of property attached to it that can be used as collateral. In an unsecured debt, such as a medical bill or a credit card, the lender cannot repossess anything of yours to regain his or her investment without the court’s permission. Chapter 7 and Chapter 13 bankruptcies can also both help with these debts, and a bankruptcy lawyer at Want A Fresh Start can show you how.

Chapter 7 will wipe out these debts by the sale or liquidation of any non-exempt property you choose. Chapter 13 allows you to set up a payment plan based on how much the creditors would have received from a Chapter 7 filing, your wages, and the amount of your debt.

When filing for Chapter 7 bankruptcy, there will be no repayment plan proposed or enacted. Instead, your non-exempt assets will be gathered and liquidated to pay creditors’ claims. This can settle back payments, leaving you free to continue your payments if both parties agree. Another option, if available, would be to give the holder a lump sum to settle the debt entirely.

Also known as a “wage earner’s plan,” Chapter 13 bankruptcy enables individuals with steady and reliable income to develop a debt repayment plan with their creditors over the course of three to five years. The time frame allocated to debtors for repayment depends on income level relative to the debts they owe. Filing for Chapter 13 stops creditor harassment by precluding them from beginning or continuing measures for debt collection during the payment period.