Blog of chapters of bankruptcy
Comparison of Consumer Bankruptcy
Chapters 7 and 13
By John C.A. Juergens 
Attorney at Law
1504 N. Limestone Street
Springfield, Ohio 45503
(937) 399-8180
Email: John@jcajuergenslaw.com
If I file bankruptcy would I lose any of my property?
Chapter 7: In most cases you are
eligible to keep most of your property such as: your residence (if $20,200 net
equity per debtor); your car (if $3,250 or less equity per debtor); your
household furnishings ($10,775 per debtor for household items so long as no
item exceeds $525); 401(k), IRA or other retirement savings account (virtually unlimited
amounts) some bank accounts, cash on hand or tax refunds ($400 per debtor), and
each Debtor has a wild card exemption of $1,075. Check with Attorney Juergens
for details on how exemptions apply specifically to your case.
Chapter 13: In almost all cases, Debtors are eligible to
keep all of their property.
If I am behind on my mortgage, car payment or other secured
debt can I keep the property?
Chapter 7: As long as the property
that you want to keep is within the equity exemption limits stated above, you
can keep the property if you and the creditor agree to reaffirm, or you keep
the account up to date. In some rare
cases such as paying for cars you have financed over 2 ½ years ago, or for
personal property, you may pay a cash amount to redeem the debt for the entire value of the property.
Chapter 13: Yes, as long as you can finance the arrearage
over the length of the plan, and you
can afford to do so.
How much do I have to pay for bankruptcy?
Chapter 7: Court costs are $299,
and you must pay for pre- and post bankruptcy debt counseling, and pay for a
records’ search and attorney’s fees.
Assuming that there are no adversary proceedings, and that there is no
need for an amendment or other unusual proceedings, the only additional costs
are for reaffirmation. Attorney fees are computed on a case-by-case
basis, but you will receive a fee agreement locking in projected attorney’s
fees at the first consultation.
Chapter 13: Court costs are $274, and you must pay for
pre- bankruptcy debt counseling, and pay for a record’s search, real estate
appraisal and attorney’s fees. (Most chapter 13 cases may be filed with only a
fraction of attorney fees paid directly, and the remainder paid as part of the plan).
I am filing for bankruptcy, I am tired of the creditor phone
calls, letters and notices. How will the
creditors I owe find out that I have filed for bankruptcy?
In either form of bankruptcy, the
case is filed electronically, and immediately I receive a court notice
indicating the case number. I will mail
this notice to all creditors you list at the addresses you provide to me. Sometimes creditors will call you after the
case has been filed, either because they have not yet received the notice or
because the caller is located at an address remote from the address listed in
the bankruptcy. You should keep a copy
of the notice at hand to tell callers the case number, date of filing, and
chapter filed. This should stop all
callers! Let me know if it does not, and
I will take the appropriate action.
What if I have a pending foreclosure, repossession, lawsuit
or garnishment?
Chapter 13: I will use the notice from the bankruptcy
court to obtain court orders in the creditor’s law suit to stay all the actions listed above.
In chapter 13 cases, a repossessed car, or house in foreclosure that has
not yet be auctioned may be saved and the car returned to you.
Chapter 7 bankruptcy notices can
be used to freeze or stay creditor’s
lawsuits. However, chapter 7 bankruptcy
cannot recover a repossessed car unless
the amount necessary to cure is paid at one time. Both chapters of bankruptcy will immediately
stop a garnishment. If garnishments are
continued after the filing of bankruptcy and before a court order can be
obtained to stop the garnishment, the court will return the garnished money to
you.
Describe each chapter of bankruptcy?
Chapter 7: All unsecured debts are discharged in
chapter 7, as long as they are the types of debts that are dischargeable and as
long as there has been no constructive or actual fraud. Debts that are secured may be reaffirmed, redeemed, or the property securing the debt surrendered. After attending
one court hearing officially called the Meeting
of Creditors, completing the second counseling class, and passing the 60
days creditors have to dispute your debts your case is discharged and the case closed.
In some cases there could be some additional proceedings prior to
discharge.
Chapter 13: At the time of filing, a plan indicating an amount of money to be paid monthly to a trustee,
who will pay all of your creditors, is proposed. The plan
must last between 3-5 years, and can repay most or all of the creditors a
portion or fraction of the amount of debt owed at the time of filing. The
monthly payment amount and percentage of repayment to creditors differs on a
case-by-case basis, but you will be provided an estimate at the first
consultation, and will be aware of the definite amount at the time of signing
the case. The plan will pay the balance
of the attorney’s fees, deposit to reinstate utilities, specific monthly
payments for secured creditors and paying mortgage arrearage and continuing mortgage
payments.
After attending one court hearing officially called the Meeting of Creditors, completing the
second counseling class, and obtaining the approval of the trustee, and
avoiding any disputes from creditors your plan will be confirmed, and the plan payment and percentage repayment will be
cemented. Once the necessary amount has been paid to
the trustee your debts your case is discharged
and the case closed.
Can I pay off my plan early?
Chapter 13: Yes, after the case has been confirmed.
What if I make too much money?
Chapter 7: To file chapter 7 you
must make less than an annual amount of money based upon family size and your monthly
budget reflects that you are unable to pay monthly payments on your debts.
Chapter 13: You virtually cannot make too much money to
file a chapter 13. If your annual income
exceeds the median amount based upon family size then your plan must last 5 years. The
more money you make the higher your plan
payments are. The maximum repayment is
100% repayment, but you will not have to pay interest in chapter 13.
Can I keep my income tax refunds?
Chapter 7: Yes, you can keep $800
per working debtor. Sometimes the
trustee will permit you to keep more of your refund. Sometimes the refund amount you can keep will
be less than this amount depending upon your cash or bank assets.
Chapter 13: In most cases you may keep your income tax
refunds. At the meeting of creditors the trustee will indicate if he wants to take
part of the refund. If the refund
exceeds $2500 per debtor the trustee may take any refund over this amount.
Sometimes, the trustee may take part of a smaller refund if there is a small
percentage of repayment.
How will bankruptcy affect my credit?
Chapter 7: Be aware that credit
worthiness and credit ratings are not an exact science. Both chapters of bankruptcy will appear on
your credit report for up to 10 years from the date of filing. However, chapter 7 debtors may rebuild credit
quickly. At the time of bankruptcy
filing the total debt amount and income to debt ratios will improve. After filing bankruptcy the best ways to
improve your credit are to timely pay your debts, pay a car payment, mortgage
or land contract regularly, avoid late charges and overdraft charges, and avoid
any negative credit actions such as charge offs, lawsuits, foreclosures or
repossessions. Reaffirming a debt may
help to improve credit. You should begin
receiving solicitations for car loans and credit cards soon after discharge.
Avoid over extending your post-bankruptcy monthly obligations.
Chapter 13: You will not be able to improve your credit
as quickly in chapter 13 as chapter 7.
While in an active chapter 13 case you may not voluntarily incur more
than $800 in new debt without petitioning the trustee. If you require a loan, you must demonstrate
to the trustee that you can afford a new loan, and that the loan is necessary
and in your best interest.
