Harassing phone calls from debt collectors, threats of foreclosure and eviction, repossessions, wage garnishments, levies on bank accounts and court ordered sale of possessions create stress and anxiety which can be eliminated by the filing of personal bankruptcy.
There are two types of personal bankruptcy – Chapter 7 and Chapter 13. Both discharge (wipe out) unsecured debt (credit cards, medical/dental/legal bills, utility bills, motor vehicle surcharges) and halt lawsuits for the collection of debt or for negligence (people suing for automobile accidents or slip and fall accidents). Various provisions in the Bankruptcy Code permit most filers to keep their cars, bank accounts, retirement accounts, tools, furniture and jewelry. Elimination of debt and the ability to keep assets are the reason that the Bankruptcy Code is called the Fresh Start Law.
Chapter 7 is a fast, affordable and straightforward procedure. A document called a Petition is filed with the Bankruptcy Court. It contains a list of assets and debts and an explanation of income and expenses. The Court appoints a Trustee (a lawyer or accountant) to review the Petition, and a hearing is conducted at which the Trustee asks questions to verify the accuracy of the Petition. The hearing must be conducted within 30 days of filing the Petition, and a Discharge of Debt is issued 60 days after the hearing.
Chapter 13 can be used to pay arrears on mortgages, rent or car payments, allowing a person to halt foreclosure, repossession or eviction. The arrears can be paid back over a period of time between three and five years. Second and subsequent mortgages can be eliminated by the Court under some circumstances. Also some car payments can be lowered. There is one Chapter 13 Trustee. She conducts the same type of hearing as a Chapter 7 Trustee, but the focus is on income and expenses to determine if the proposed Plan is feasible and workable. When the Plan is completed and all payments are made, the Court issues a Discharge of Debt.
Oftentimes, accumulated debt becomes overwhelming. Sometimes there are no realistic solutions. When these circumstances occur, Bankruptcy becomes the answer.
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