The Automatic Stay:
When you file either a Chapter 7 or a Chapter 13 bankruptcy, the court automatically issues an order that includes a wonderful thing called an "automatic stay." The automatic stay directs your creditors to cease their collection efforts immediately. Debt collectors have to stop harassing letters, calls, visits, lawsuits, utility disconnections, garnishments, evictions and foreclosure proceedings. The creditors must obtain permission from the court to continue any such efforts.
Chapter 7 Bankruptcy:
Chapter 7 is a court-supervised procedure where a trustee takes available assets, reduces them to cash and makes distributions to creditors. In our experience most debtors keep everything they have because they have a right to keep certain exempt property. In most cases unsecured creditors receive nothing and the debtor is released from the debt. We have helped clients discharge millions of dollars of debt.
Debtors do have to qualify for filing by passing what is called "the Means Test." People with low income can pass easily. But you can earn significant monthly income and still qualify if you have a lot of expenses. We can help you analyze whether you will qualify. If you are filing because of business debts you do not have to take the Means Test.
Chapter 7 bankruptcy is fast, effective and does not require payments over time. A typical case requires you to gather paperwork and based on your documents we create the case (a petition and supporting documents) and interface with the trustee. We will accompany you to a meeting with the trustee which lasts about 5 minutes. After discharge the debtor will emerge debt-free except for secured debts (car and mortgage) and certain nondischargeable debts (recent taxes, support obligations and student loans).
Chapter 13 Bankruptcy:
Chapter 13 adjusts your debts and is for debtors who have any kind of income. Debtors do not have to qualify by passing a Means Test., Debtors propose a payment plan that lasts 3 to 5 years in order to pay off arrearages (late, unpaid payments) in amounts which the debtors can handle. Chapter 13 is for people who can't qualify for Chapter 7 because they have too much income or they want to keep property which otherwise would be liquidated in Chapter 7.
We work with you to create a plan that the trustee can accept. You will make a monthly payment to the trustee and the trustee will pay your creditors. You remain in possession of your property. Depending on your finances you may be excused in part or completely from repaying some of your unsecured creditors.
Most of our Chapter 13 clients have real property that they want to keep. Chapter 13 allows debtors to repay arrearages in monthly payments for up to 5 years. The debtors must also pay their currently accruing payment.
One of the most valuable features of Chapter 13 is the ability to strip off 2nd or 3rd mortgages. The huge drop in property values has created a situation where many people owe more to the banks than their property is worth. If your property is now worth less than the total of your first mortgage you may strip off (eliminate) any junior mortgages. Our clients have shed hundreds of thousands of dollars in mortgages this way.