Bankruptcy?
May 22, 2007 by blog100
come_on_kiss_the_gun said : )
I was just wondering what is the difference between Chapter 7, 10 & 13 bankruptcies. How did the new law that Bush passed now affect bankruptcies (or does it at all)? I’ve heard everything that you can’t file for Chapter 13 bankruptcy anymore to you have to take financial planning classes thereafter. Also, is it advisable at all? I know normally people say make it your last resort, but I am beyond in debt and do not have any other resolutions. Any horror stories after filing? Any positive stories? Please enlighten me.
I was just wondering what is the difference between Chapter 7, 10 & 13 bankruptcies. How did the new law that Bush passed now affect bankruptcies (or does it at all)? I’ve heard everything that you can’t file for Chapter 13 bankruptcy anymore to you have to take financial planning classes thereafter. Also, is it advisable at all? I know normally people say make it your last resort, but I am beyond in debt and do not have any other resolutions. Any horror stories after filing? Any positive stories? Please enlighten me.
thanks!
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I filed the week before the laws changed, but I know a little about what changed.
Ch. 7 is a liquidation, where your unsecured debts are discharged and not owed on anymore. Secured debts can be reaffirmed in some cases. This is the one that’s almost impossible to do now.
Ch. 13 is for debt restructuring. There’s a formula they use to see how much money monthly you can afford to pay back. If, when using this terrible formula created by the IRS, you can afford to repay even $100 per month, you must file Ch. 13 and settle out your debts, over a maximum 5 year period.
The dirty secret that no one talked about before the law changed, is that 4 out of 5 people who filed Ch. 13 BEFORE the change, failed. You miss one payment and the whole thing can get derailed. God help you if you lose a job, get injured, whatever.
There are also some “means” tests, where your income is compared to the average income for your area. If you make very little money, you may still qualify for a Ch. 7.
And yes, I believe that before anyone can file a BK now, you must meet with a non-profit credit counselor first.
Call a few BK attorneys. Get quotes on prices, and meet with a couple that are cheap but seem knowledgable. Most will give you at least a 30 minute consultation at no charge, in hopes of earning your business.
CHAPTER 13 MEANS YOU HAVE TO PAY BACK ALL OF YOUR DEBT TO A BOARD OF TRUSTEES, CHAPTER 7 MEANS YOUR DEBT IS WIPED OUT. THE ONLY ADVICE I CAN GIVE IS TO STAY AWAY FROM CREDIT COUNSELING AND IF YOU DO FILE BANKRUPTCY FILE A CH 7 NOT A 13. WHAT YOU HAVE TO REMEMBER IS A BANKRUPTCY IS A BANKRUPTCY AND JUST BECAUSE YOU ARE PAYING BACK IN A CH13 DOESN’T MAKE ANYTHING BETTER.
The new law is much more complicated than before. It was designed to deter people from walking away from their debts. If you are facing personal bankruptcy then there are two chapters which might apply: chapter 7 and chapter 13. Which one would be best depends on your cirumstances – your income, your debts, etc. etc.
Do yourself a favor and research the subject before you make a move. It really is a last resort and there could be alternatives. This website has a lot of information, useful links etc.
Good luck!