Bankruptcy is a right guaranteed by the United States Constitution as well as Federal and State statutes. Bankruptcy is designed to allow people to gain a fresh financial start by eliminating or reorganizing debt. Your creditors MUST stop all collection activities IMMEDIATELY after bankruptcy is filed. 

There are two types of bankruptcy that apply to most situations. The most common type of bankruptcy is Chapter 7 Bankruptcy. Under Chapter 7 a person is allowed to keep “exempt” assets (probably the majority of what you own), the non-exempt assets may then be sold to pay creditors. An experienced bankruptcy attorney will identify any issues and plan to reduce or eliminate the loss of belongings. The result of a successful bankruptcy proceeding is a “discharge,” which releases the debtor from payment of affected debts.

The second most common type of bankruptcy is Chapter 13. Under Chapter 13 we create a repayment plan which typically must repay only a fraction of your debt. The specified payment is made each month for a period of 3 to 5 years, similar to a car payment. Chapter 13 is often the most effective in dealing with secured creditors, such as mortgage companies and financing companies, who might otherwise repossess a home or car. Chapter 13 has additional advantages because it can extend the time to repay debts and reduce the interest rate and total debt repaid on car loans. We may even be able eliminate your 2nd mortgage or HELOC. Chapter 13 can also suspend collections against friends or family who cosigned on loans.

Posted in: Frequently Asked Bankruptcy Questions