BANKRUPTCY INFORMATION

There are three chapters (types) of bankruptcy that can be filed with
the Bankruptcy Court. Any type of bankruptcy filing creates an
“automatic stay”, which immediately stops creditor harassment,
foreclosures, evictions, repossessions, lawsuits, garnishments, tax
levies, and utility shut-offs. Generally, creditors cannot take any
further action against you or your property without permission from the
Bankruptcy Court.

In order to determine the appropriate solution to your financial
problems, we first look at all your debt and classify it according to
different categories. Depending upon the nature of the debt, it is
treated differently. Second, we calculate your income from all sources.
Third, we prepare a detailed budget of all your monthly living expenses.
This information is then analyzed and will generally determine if you
are eligible for Chapter 7 or Chapter 13. We then look further for “red
flags” or problem areas such as non-dischargeable claims, preferences,
conveyances, and non-exempt property. At this stage we can quote you a
fee for the legal services you qualify for.

CHAPTER 7

A Chapter 7 will discharge (cancel or eliminate) most debts, including
credit cards, medical bills, personal loans, judgments, balances
remaining on repossessed vehicles, some income taxes, and most other
unsecured debt. Child support, spousal maintenance, divorce property
settlements, fraudulent debts, most taxes, and student loans (unless
undue hardship applies) are not dischargeable. To qualify for Chapter 7,
you must not have filed and received a discharge in a Chapter 7 case
within the last eight years. Furthermore, you need to show that you are
below the “median income” for a family of your size, or otherwise pass a
complicated “means test”. The majority of people filing Chapter 7 fall
below the “median income” and need not pass the “means test” budgeting
of their expenses. An average Chapter 7 case takes approximately three
months to complete after it is filed with the Bankruptcy Court, and
requires one appearance before a trustee, called the Meeting of Creditors.

In most cases, you will be able to keep your home, automobile,
retirement accounts and pensions, household furnishings, and all your
property by claiming either the state or federal exemptions. Also, you
will almost always need to keep making the payments on your house or
automobile, if there is a mortgage or security interest against the
property, to keep the property.

CHAPTER 13

A Chapter 13, also referred to as a “wage earner plan”, is a
reorganization of a debtor’s debt, where the debtor pays their creditors
over a three to five year plan, and at the completion of the plan the
debtor receives a discharge. The filing of a Chapter 13 stops interest
from accruing on most debts, except secured creditors, and allows a
debtor to generally pay their unsecured creditors a percentage (less
than the full balance), while discharging any remaining balance at the
end of the plan. The amount of your monthly plan payment to the Chapter
13 Trustee is based upon your monthly income and reasonable and
necessary monthly living expenses.

A Chapter 13 case filing stops foreclosures on home mortgages (so long
as the sheriff’s sale has not been held), and allows a debtor to pay the
mortgage arrears through the chapter 13 plan over time, while the debtor
continues to pay the regular monthly mortgage payments after the case is
filed.

A Chapter 13 case filing can also be used to stop the repossession of an
automobile and allows the debtor to pay the loan through the plan. If
the automobile has been repossessed before the case is filed, we can
generally get the car back immediately upon the filing of the case so
long as the lender has not already sold it. Also, if the automobile loan
is over 910 days old, we can generally pay the lender what the vehicle
is worth rather than the full loan balance.

Other debts that can be reorganized and consolidated in a Chapter 13
case include credit cards, medical bills, personal loans, back taxes,
student loans, child support arrears and spousal maintenance arrears,
and most other types of unsecured debts.

CHAPTER 11

Chapter 11 is a business reorganization, primarily used by corporate
entities to restructure and pay its creditors over a period of time,
while under bankruptcy protection.

CREDIT COUNSELING REQUIREMENTS

Under the changes to the Bankruptcy Code that took effect October 17,
2005, a person filing either a Chapter 7 or a Chapter 13 is required to
take two short credit counseling courses, one before you file bankruptcy
(credit counseling), and one after you have filed your case (financial
management). The credit counseling agency must be approved by the United
States Trustee. The counseling sessions can be done over the phone or
internet, or in person, and take about a half hour to an hour. The
agencies charge a small fee for the courses. For a list of approved
credit counseling agencies, CLICK HERE. For a list
of approved providers for the personal financial management course,
CLICK HERE

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The information you obtain at this site is not, nor is it intended to be, legal advise. You should consult an attorney for individual advice regarding your own situation. Copyright- 2006 Michael K. Hoverson & Associates, P.A.- All Rights Reserved.

Pursuant to 11 U.S.C Section 528, “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”