Credit Cards
This type of debt is usually a dischargeable debt. This means that should you file a Chapter 7 or a Chapter 13 most likely this debt will be eliminated. While there are some exclusions to that rule. Most bankruptcy filing will eliminate your liability to this debt.
Auto Loans
CHAPTER 7
In most instances you can retain a vehicle even if there is an auto loan. Should you wish to retain your vehicle in a Chapter 7 you must be current on your car loan and have little to no unprotected equity in that vehicle.
If you had a car repossessed and the creditor is attempting to collect on the “deficiency balance” then a Chapter 7 can eliminate their ability to collect this amount from you.
You can choose to surrender a vehicle to the lender, and be protected from any deficiency balance owed under the contract.
CHAPTER 13
Should you be behind or have equity in the vehicle, then a Chapter 13 to repay the loan or protect the equity is often a much safer option.
The Court sets the interest rate on a car loan repayment in a bankruptcy, and often times it is significantly less than what a person was paying prior to filing bankruptcy; therefore, often times the repayment of the car loan in the bankruptcy is substantially less than the contract repayment.
Sometimes filing a Chapter 13 can even be used to obtain a repossessed car back from the lender; however, this requires the case being filed immediately upon the repossession. Also, should this be done the Debtor(s) would be responsible for repossession and storage fees to obtain the vehicle back. This is a very extreme option, and should this become necessary you MUST CONTACT ATTORNEY IMMEDIATELY as the timing is critical.
You can choose to surrender a vehicle to the lender, and be protected from any deficiency balance owed under the contract.
Home Mortgages
CHAPTER 7
If you are current on your mortgage, and you have little to no equity in your home, then you are likely to be able to retain the home if you file a Chapter 7. It does not mean that you keep the house for free, and do not have to repay the loan if you wish to keep it. Instead, you can file a Chapter 7 and continue repaying the loan outside of the bankruptcy. If you wish to maintain personal liability for the loan, you will want to discuss your options for a reaffirmation in the bankruptcy.
If you are behind on your home and you wish to surrender the home to the mortgage lender and eliminate any personal liability you have to the loan then you can file a Chapter 7 to surrender the real estate to the mortgage lender.
If you had a house and it was foreclosed, then often times a mortgage company will attempt to sue you for the “deficiency balance” on the loan. Filing a Chapter 7 will eliminate your liability on this debt.
CHAPTER 13
This is often a great option if you are behind on your mortgage and wish to have an opportunity to repay the arrearages over a period of time.
Filing a Chapter 13 will also stop any foreclosure; however, you MUST file the case PRIOR to the foreclosure sale date or the filing of the case will not stop the home from being sold.
You do not have to be behind on your mortgage to file a Chapter 13, and if you are not you keep paying your mortgage payment as usual.
Mobile Home Loans
CHAPTER 7
First in a bankruptcy a mobile home is essentially treated as an automobile.
If you are current on the payments, then you can often retain and/or reaffirm the debt so that you can retain the mobile home.
If you are behind on payments there is no guarantee that you will be able to retain the mobile home.
You can surrender the mobile home to the lender to eliminate repayment.
CHAPTER 13
Any mobile home loan is treated like an auto loan.
A mobile home loan will have to be repaid over the 3 to 5 years of the bankruptcy.
The Chapter 13 Plan will generally modify the interest rate on then loan. Often times, this new interest rate is lower than the rate in a person’s original loan contract.
You can surrender the mobile home to the lender to eliminate repayment.
Back Income Taxes
CHAPTER 7
Back taxes are often NOT DISCHARGEABLE. There are some exceptions to this non-dischargreability; however, in order to determine whether the exception applies an attorney might have you obtain specific tax documents from the IRS or the state tax authority to determine how this rule applies to your tax situation.
CHAPTER 13
Because back taxes tend to be priority unsecured debts and they are not dischargeable, a Chapter 13 proposes to repay the necessary portion of the tax debt. Now, you must realize that most often when the IRS states you owe back taxes it includes penalties and interest in the total amount due; however, in many Chapter 13 repayments you only repay the principal tax due and the penalties and interest are discharged like other debts.
In order to determine the exact amount of taxes necessary you might have to obtain certain tax documents.
It is very important that you fully disclose any and all taxes that you might owe.
Personal Property taxes
CHAPTER 7
These types of debts are not always dischargeable. It is important that you disclose what personal property taxes you owe and for what years, as unlike income tax some personal property taxes are dischargeable in a Chapter 7.
CHAPTER 13
This type of Bankruptcy Can be used to actually be used to repay the necessary personal property tax years. This is important since you cannot license or obtain new tags for your vehicle if you are behind in personal property.
If you owe personal property taxes, you can propose to repay them in the Chapter 13 plan. After filing the bankruptcy you can then follow a specific procedure to legally register your vehicle.
IMPORTANT: A Chapter 13 will not take care of future personal property taxes. It will only include the taxes assessed before filing your case.
Medical Bills
This type of debt is usually a dischargeable debt. This means that should you file a Chapter 7 or a Chapter 13 most likely this debt will be eliminated. While there are some exclusions to that rule. Most bankruptcy filing will eliminate your liability to this debt.
Child Support/Alimony
CHAPTER 7
This type of debt is not dischargeable in a Chapter 7. This means after you file your bankruptcy you will still owe any arrearages and future amounts as well.
CHAPTER 13
If you have child support, alimony, or other domestic support obligation arrearages/delinquencies you can repay the delinquency in your Chapter 13 Plan.
Sometimes a Chapter 13 can even be used to assist a Debtor in a criminal action for child support arrears. Some Prosecutors will use a Chapter 13 repayment of these arrears to prevent actions to put Debtor in jail. There is no guarantee for this; however, it is a possibility. You should talk to an attorney if you are facing criminal actions for non-payment of support.
ALSO, you MUST STAY Current on all future support payments due from the date of filing the bankruptcy forward, or the Court WILL DISMISS your case.
Lawsuits
The filing of either a Chapter 7 or a Chapter 13 should stop most lawsuit actions.
Exception: Criminal proceedings are not stopped upon the filing of bankruptcy even if the criminal action is the result of a bad check or child support arrears.
There are exceptions to dischargeability and even options for Creditors to gain permission to continue with lawsuits; therefore, it is important that you discuss all of your pending lawsuits, garnishments, etc. with an attorney.
Student Loans
Student Loans are generally not dischargeable in bankruptcy. There are options based on certain situations that actions can be taken to overcome this rule; however, it is very limited.
Student loan companies will put all of your student loans on deferment while you are in a bankruptcy.
Liens
Liens is when a creditor has in interest in real estate or personal property.
Liens come in many forms
• Judgment liens
• Tax liens
• Auto liens
• Mortgages
Some liens must be repaid and others can be avoided based on certain scenarios.
It is important to discuss these issues because a status of lien, or property might affect dischargeability and also any future repayment in order to retain the real estate and/or personal property.
Garnishment
Filing of either a Chapter 7 or Chapter 13 will stop any current garnishments.
Unless a creditor obtains permission they cannot establish a garnishment once a bankruptcy is filed.
If the Creditor obtains funds from you through a garnishment after your case is filed, the creditor will have to return these funds. It does not mean that the creditor will returns funds obtained before filing.
Bank Levy
This occurs when a Creditor obtains permission to seize any money in your bank account during a period of time. This levy period usually lasts about 30 days.
Most banks do not turnover these levied funds until the completion of the levy period.
Filing of a bankruptcy will stop a levy.
Most often the filing of the bankruptcy means the creditor will not obtain any of the funds.
It is important to discuss any Bank levy with your attorney, as any funds in your bank account are property of the bankruptcy estate. While the creditor might not obtain these funds, if you have more money in the bank account than can be exempted from your bankruptcy, you will likely have to turnover these funds to the Trustee. The Trustee will not care if you spent these funds.
Foreclosure
Filing either a Chapter 7 or a Chapter 13 will stop a foreclosure sale. BUT YOU MUST FILE THE CASE BEFORE THE SALE DATE!
CHAPTER 7
Filing a Chapter 7 bankruptcy will only temporarily stop the foreclosure sale.
If you are needing more time to move or find a new place to live, a Chapter 7 could be used to buy a little more time.
You can choose to surrender the real estate, to protect you from any deficiency balance when the mortgage company sales your home for less than you owe.
NOTE: The surrender of the real estate does not actually affect the title of the real estate. This means that if you file before foreclosure occurs, then it might take a while for the mortgage company to actually foreclose, which leaves you responsible for the real estate until title actually changes.
CHAPTER 13
Filing a Chapter 13 will stop the foreclosure sale date. This can be permanent or only a temporary stop to the sale.
You can use your Chapter 13 plan to cure arrearages to your mortgage company.
YOU CAN USE THIS TYPE OF BANKRUPTCY TO SAVE YOUR HOME.
You can also use this type of bankruptcy to only temporarily stop the sale, and you can surrender you home to the lender. This could offer you more time to find a new place to live.
You will not get your house for free.
Should you wish to retain your home, you will have to continue making your ongoing mortgage payments as they come due each month after the filing of your case. Failure to pay your mortgage each month gives the lender the option to obtain permission, through what is called a Motion for Relief, to foreclose on your home.
You must keep your house insured and all real estate taxes paid during your bankruptcy.
Past Due Real Estate Taxes/Tax Sale
CHAPTER 7
Real Estate taxes are liens on your home. This means that the creditor, has the option to sue you individually on the debt and also can sale your home.
Filing a Chapter 7 can discharge your personal liability to this debt (meaning you cannot be sued) however, it will only temporarily stop a tax sale. The creditor can obtain permission to continue with the tax sale, or they can wait till you are discharged and then reset the sale again.
CHAPTER 13
Because real estate taxes are liens on your home, should you wish to retain your home, you must repay any and all real estate taxes owed prior to the filing of your case through your plan.
Real Estate Taxes that come due after the filing of your case cannot be included in your repayment.
You can also choose to surrender the real estate to the tax agency to avoid your personal liability; however, until the home is sold it will remain your responsibility.
Repossession
CHAPTER 7
A repossessed car cannot be obtained back from the creditor merely by filing a Chapter 7.
Should you owe a debt for a repossessed car, it is most likely dischargeable in a Chapter 7.
CHAPTER 13
If you are able to file the case immediately upon the repossession, you can often obtain your car back from the creditor; however, you will be responsible for any storage or repossession fees.
You can stop an impending repossession by filing a Chapter 13; however, if you wish to retain the car you must pay the debt off during your bankruptcy plan. Often times, this repayment is actually less than the original car payment.