If you decide that bankruptcy is your best option, your first question probably is how does it work.
The two most common bankruptcies are Chapter 7 and Chapter 13. A Chapter 7 is the most common bankruptcy filed by consumers and eliminates most all of your debts and allows you to keep all exempt assets. Exempt assets are property that the bankruptcy court cannot take away from you. Which assets are exempt depend on your state’s exemption statutes. You can find your specific state’s exemptions at www.exemptionsexpress.com. A Chapter 7 bankruptcy generally takes 4-6 months from filing to discharge.
A Chapter 13 bankruptcy is for individuals whose income is above the IRS median income or who have filed bankruptcy within 8 years prior to the current filing. A Chapter 13 bankruptcy allows you to save your home, reduce or eliminate second liens on the home, payoff your vehicle, and allows you to keep all non-exempt assets. Monthly payments are made directly to the bankruptcy trustee, who is like a manager. The trustee then pays your debts such as a vehicle, back taxes, child support and any arrearages on your home. Then, if money is left over, the remaining funds would be divided among your unsecured creditors. Payments are calculated by taking your net monthly income and subtracting allowable monthly expenses. That figure is considered your disposable monthly income. This is what you would be required to pay thru the bankruptcy trustee over a period of 3 to 5 years, depending on your circumstances.
Once you complete all Chapter 13 plan payments, most of your debts are discharged except for most student loans, child support or any other domestic support objection, certain taxes, criminal fines or restitution, and long term secured debts such as a mortgage.
Friends may tell you that bankruptcy is easy to file on your own, or that they can prepare the bankruptcy document for $250.00. While it may have worked in the past, the 2005 changes to the Bankruptcy Code has transformed a complex set of laws into a series of hidden mine fields and traps. You need an experienced bankruptcy attorney to guide you through the poorly drafted bankruptcy law. I offer free consultations. Call today to schedule an appointment about your bankruptcy options.
Attorney Profile: Janet Spears, Arizona Bankruptcy Attorney