Bankruptcy

There are presently three chapters bankruptcy available to most consumers, chapter 7, 11 and 13. Consumers generally file under chapter 7 or 13. Chapter 11 is a business reorganization.  There are other chapter available to specific types of debtors as well.

CHAPTER 7

The chapter 7 bankruptcy is often referred to as a total liquidation. When you file a petition an estate is created, and a trustee is appointed to take control of your property. The bankruptcy code allows a consumer to exclude certain property from the estate. In Washington, the federal exemption laws allow consumers to keep most of their property. For example, a married couple may keep their home if the equity in the home is less than $35,000.00. Other exemption laws allow most consumers to keep their vehicles, household furnishings and other personal property. If the consumer has any property that is not exempted from the estate, that property is sold and funds are used to pay creditors’ claims. If in most chapter 7 cases there are no assets available to pay creditors.

A chapter 7 case begins with the filing petition. After the petitioner is filed in the court schedules a meeting of creditors. The meeting of creditors is usually held about 30 days after the filing of the petition. At the meeting the consumer is placed under oath and is asked questions about his financial affairs. Creditors may attend the meeting and ask relevant questions. Typically no creditors attend the creditors meeting. The trustee asks a few questions and excuses the consumer. This meeting is generally the only contacted consumer will have with the bankruptcy court.

Also upon filing the petition, the court issues on order which prevents creditors from taking any further action to collect any debts. This is called the automatic bankruptcy stay. The bankruptcy stay offers the debtor immediate relief from the aggressive tactics of debt collectors. If a creditor violates the provisions of the automatic stay, the consumer can bring in action for damages, punitive damages and award of attorney fees. Most creditors will stop contacting the consumer once they learn of the bankruptcy filing.

About 90 days after filing the petition the consumer receives the discharge. The discharge permanently prevents creditors from making personal claims against the consumer for any debt that was incurred before the filing of the petition. Some debts do not get discharged at the end of the chapter 7 bankruptcy, for example most taxes, student loans and child support.

CHAPTER 13

The chapter 13 bankruptcy is often referred to as the wage earner’s petition. In chapter 13 the consumer devotes some of his future income to pay back part or all of his debt. This is done through the chapter 13 plan which the consumer files with his petition. When the petition is filed, an estate is created and the standing chapter 13 trustee is appointed to your case. The consumer maintains control of his or her property.

It is the job of the chapter 13 trustee to be sure that the consumer and the creditors follow the provisions of the bankruptcy code. The chapter 13 trustee also collects payments from the consumer and distributes them to the creditors. It is the duty of the chapter 13 trustee to assist the consumer in completion of his plan.

A chapter 13 plan lasts for three to five years. At the end of the plan, any remaining debt is discharged by order of the court. The discharge in chapter 13 is often referred to as a Super Discharge because it discharges more debt than the chapter 7 discharge. For example, a chapter 13 will discharge traffic in fractions. A chapter 7 will not. Therefore with the filing of a chapter 13 bankruptcy, he consumer is able to obtain his driver’s license if it was suspended as a result of failure to pay traffic fines.

There are certain requirements that the consumer must meet in order to file chapter 13. The consumer must have some type of regular income in order to make the plan payment. There are also limitations in the amount of debt that a consumer may have. Because the consumer receives tremendous benefit, he must act in good faith. In most cases, consumers do not have problems qualifying to file a chapter 13 petition. Our legal experts at the Durkop office can help you determine which chapter work best for you please contact us for an appointment to discuss your financial situation with one of our legal professionals.

Bankruptcy litigation involves issues which arise during the course of your bankruptcy. Typical bankruptcy litigation involves the determination of dischargeability of certain debt. It may involve issues of discharge or recovery of property that was transferred before the filing of your bankruptcy.

If you have problems after filing a bankruptcy, questions about your bankruptcy should first be directed at the attorney who filed your bankruptcy petition. If he cannot help you through your problem, you should seek help from a bankruptcy litigation expert.