Filing Bankruptcy

Bankruptcy can be tricky to understand, especially when we talk about personal bankruptcy, there are many misconceptions regarding this topic. Bankruptcy is a term used when a company or a person has debts that they can’t repay, being that credit, mortgage payments, or other types of debts.

Bankruptcy can, in some cases, reduce or even eliminate your debts, save your home and keep bill collectors away. Still, it can also have serious consequences, including damage to your credit score. Chances are if you are late on your bills, your credit score has already dropped.

Filing Bankruptcy

When you file for bankruptcy, you get an automatic stay (block) on your debt, which keeps creditors from collecting. While this stay is in place, collectors can’t garnish your wages or deduct money from your bank account. Also, they can’t go after your secured assets.

Starting this process is not free; the filing fee for personal bankruptcy is around $300 for chapters 7 and 13. There are also attorney fees since this can be a tricky and complicated process, we strongly advise you to use a lawyer, even though you can file without one. Attorney fees can go up from $1,500, depending on the chapter and the complexity of the case.

The government requires that filers get credit counseling 180 days before submitting your bankruptcy paperwork. You will also have to take a second debtor education course during your bankruptcy to get your debt discharged. After filing, there is a “meeting of the creditors,” which is a court meeting between the person who files for bankruptcy, the bankruptcy trustee, and any creditors who want to attend.

Chapter 7

Most people that file Chapter 7 bankruptcy will not have to liquidate their property because it’s exempt or not worth it. After the meeting of the creditors, the trustee will decide to liquidate the assets or not. If the trustee does find assets to be sold, the debtor has to surrender the assets or pay its equivalent cash value to pay back the debt.

Chapter 13

With chapter 13, people work out a plan with the court to pay off their debts. Some debts will get paid in full, like priority debts, including child support, alimony, tax obligations, and wages owed to employees. Unsecured, low priority debt may not receive much at all.

If you have questions about filing bankruptcy, contact a Rio Grande bankruptcy attorney today.