The process of filing for bankruptcy or insolvency in a court of law may differ in two common scenarios. For instance, in chapter 7, insolvency or bankruptcy differs from what is obtainable in chapter 13. The former refers to individual bankruptcy who cannot pay his debts. It may also be a situation close to losing all his assets to creditors.
Nevertheless, bankruptcy filing in chapter 13 restricts debts. In that case, the creditors can get their money repaid over an agreed period. Also, it allows the debtor to get another chance at life and try again. We observe that many people have questions on how to differentiate between the two types of bankruptcy. In addition, they may have additional questions and don’t know where to get the information they need.
How can I file for Chapter 13 Bankruptcy?
The chapter 13 bankruptcy process aims to restructure debts to make it easier for debtors to repay creditors. However, before you can even begin this process as a debtor, you should get professional counsel from insolvency lawyers. When you complete the counselling, you have about 180 days to file your petition at bankruptcy court. You will need the services of an attorney to file the case.
Meanwhile, note that the filing process often attracts about $235 as the case filing fee. In addition, you will also pay a miscellaneous administrative fee of $75 to the court as well. When filing, you should come up with an outline of your repayment plan. You must have drawn that up with your attorney before the day of submission. The repayment plan may cover three to five years, depending on your monthly income and the state’s median wage.
The case of having up to five years occurs if your monthly income is higher than that of the state median. There are primary forms you must fill out anytime you are filing for bankruptcy in court. Besides, you may ask for some help from the insolvency lawyers. These forms include
- A form containing the names of your creditors, the amount owed and the nature of their claims of repayment
- The form that shows your income source, the amount you earn monthly and the frequency of that payment
- A list of all your properties and assets of the individual entity
- Accounting details of all your monthly living expenses, including food, clothing, utilities, shelter, taxes, and transportation.
Will creditors still collect their debts after I file for bankruptcy?
Generally, creditors cannot contact you anymore when you file for an official declaration of bankruptcy in court. If any creditor demand payment on your obligations after filing your petition in court, that creditor has committed a crime. From that time onwards, the collection activities are stayed and managed in the court. At the same time, the creditors cannot file lawsuits or wage garnishments against you.
Similarly, as a debtor, you cannot also contact your creditors in the case of your debt. The court issues an automatic stay that covers the progressive collection of the consumer debt you incur. The debts may be due to personal, household or family reasons. A creditor must not also receive any payment from you after you have filed the bankruptcy protection. If you had made such payments, the creditors takes the payment as part of your first repayment. In other words, your bankruptcy repayment plan has officially started.
Does the repayment plan cover credit card debt?
All the debts you need to pay creditors can be grouped into three main types, namely
- General unsecured debt
- Secured debt, and
- Priority debt
The debt you accumulate due to the use of credit cards is considered part of the general unsecured debt. This type of debt is not listed as part of the arrangement to repay your debts. It would help if you considered certain factors when listing our obligations in order of repayment. You should also understand the amount you must pay to the creditor at each instance. Usually, the credit card debt in the list is often not repaid in full.
What is the possible penalty if I fail to make a scheduled repayment?
If you miss a scheduled payment in your bankruptcy repayment plan, you risk losing your bankruptcy. Your trustee or one of the creditors may file a petition against the court. The petition request may ask the court to dismiss your bankruptcy case. But this situation does not seal your fate just yet because there are other options you can use. For instance, one option is to bring all your payments to the current one.
Suppose you can prove that you had a temporary financial emergency, which was why you defaulted. In that case, you will need extra time to get caught up with the pending repayment. But you were making a strong case such as this one requires an expert insolvency lawyer. If you can explain the situation to the court in detail, then make a good one. In the end, the court may grant your request for more time to fulfil your payments.
If default happens, you can now request a reduction of your monthly repayment or any kind of modification. One way or the other, you can find a comfortable state that profits both parties. This request applies to the condition of your financial emergency and how long you think it will last. For instance, if you suddenly lose your job, everyone can understand that your income is affected. As a result, you may be not be able to cope with your financial obligations.
Can I discharge my student loan debt with a bankruptcy filing?
A student loan debt is another kind of debt that one may want to know if filing for bankruptcy can cancel. But the only condition whereby a court can discharge a student loan debt is if you file a separate petition. This separate petition is known as the Complaint to Determine Dischargeability of Debt. Otherwise, most courts will not release your student loan debt. Another reason is that student loan debt falls technically under priority debts, which you must pay in full.
However, if you can also convince the court that you were under some undue hardship factor, you stand a chance. You will have to show how these factors affect your means of repaying your student loan. Some common elements may include poverty, permanent disability and other unpleasant situations. All these factors may affect your capability to repay the student loan debt.