Types Bank bwThere are various types or chapters of bankruptcy; however, only two chapters most often apply to individuals or small business owners: Chapter 7 and Chapter 13. Your financial situation and goals usually determine which type of bankruptcy filing is best for you. Some will attempt to file a bankruptcy without a lawyer. Though it’s possible, it usually does not go well. The U.S. Bankruptcy Code is a very complicated set of laws, with many pitfalls. Always seek the advice of an experienced attorney when considering ways to resolve debt and other financial issues. Read on below for more information:

Chapter 7

Chapter 7 is what most people understand as bankruptcy. It’s a relatively short-term bankruptcy in which you do not have a monthly payment. However, it’s called a “liquidation” bankruptcy because the bankruptcy court appoints a Trustee to review the case and determine if you have any assets that can be liquidated in order to pay something to your creditors. Part of our job is to review everything prior to the bankruptcy filing to determine the likely result and to help you protect any assets you hope to keep. Chapter 7 usually makes the most sense when have no income or so little income that you can’t afford your necessary living expenses (rent or mortgage, car payment, gas, food, etc.).

Under Chapter 7, certain debts are discharged (usually credit cards, medical bills, personal loans not attached to property and other various types of debt) and certain debts are not discharged in Chapter 7 (usually most taxes, student loans and sometimes debts related to recent cash advances, balance transfers or luxury purchases and other various types of debt). If you’re current on a mortgage or car payment, then you can usually keep the house and car as long as you maintain the payments. If you’re behind on a mortgage or car payment, then we often consider a Chapter 13 or other alternatives.

When prepared correctly and in the correct financial circumstance, most Chapter 7 cases proceed smoothly and result in a discharge with no loss of assets. From that point on, neither creditors nor third-party collectors of discharged debts can attempt to collect these debts from you anymore. We consider this a successful Chapter 7 result. Please call us at 804-353-0287 for an appointment so we can help determine if Chapter 7 is an appropriate option for you.

Chapter 13

Chapter 13 is becoming a more common type of bankruptcy due to its flexibility and ability to solve financial issues that can’t be solved by a Chapter 7 or bankruptcy alternative. In a Chapter 13, the court appointed trustee cannot liquidate your assets. Instead, we propose a payment plan intended to pay back some affordable percentage of your general unsecured debt (usually credit cards, medical bills, personal loans not attached to property and other various types of debt). The Chapter 13 can also propose to pay back taxes, mortgage arrears, car loans, and other debts that aren’t resolved by a Chapter 7.

Chapter 13 is an option for people who either cannot be in a Chapter 7, people who want to avoid the potential issues of a Chapter 7, or people who believe they can and would like to pay what they can afford. Chapter 13 is often a good option for people with loans secured by a house or car that you hope to keep after the bankruptcy—especially if you’ve fallen behind on the loan payments.

Chapter 13 payment plans generally range from 3-5 years.

Pre-Bankruptcy Credit Counseling Requirement

Before filing any type of bankruptcy, you will be required to receive credit counseling from an approved provider and get a certificate that we file along with your case. You will also have to get another certificate before you finish your case. Though it sounds time-consuming, it’s not too bad. The credit counseling courses are available online or on the telephone and generally cost less than $50-$100 for both certificates. The providers will sometimes waive the fees if they determine it is appropriate. Here is a link to the list of U.S. Trustee approved credit counseling providers: Approved Credit Counseling Providers

You explained everything so I could understand it and you helped me see that there really is a light at the end of the tunnel. Chandler Pecoraro was a blessing to me.

- Renita F.

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