Bankruptcy FAQ
Bankruptcy has helped millions of people clear their debts. But you probably want to know how it might help you.
While we can give you some general information about how bankruptcy works, to get in-depth information on how it may affect you, speak with a local bankruptcy attorney. An attorney can answer your questions and explain how the laws in your state apply to you.
What is Chapter 7 bankruptcy?
Chapter 7 is the most common type of personal bankruptcy. It’s designed to help people eliminate their debts quickly and completely. In particular, it may help you if you don’t have the regular income needed to pay off your bills.
A Chapter 7 bankruptcy filing is usually finished in just a couple of months. Chapter 7 may be used to clear debt related to: Credit cards, medical bills, personal loans, utility bills and payday loans.
Also, you may use Chapter 7 exemptions to protect your home, car and other valuables from forced sale.
What is Chapter 13 bankruptcy?
Chapter 13 is an alternative to Chapter 7, and provides even stronger protections for your home, cars and other property. This chapter allows you to include debt related to your mortgage and car payments.
In Chapter 13, all your debts are combined and ordered, and some may even be reduced. Then, you’ll make a regular payment to a court-appointed trustee who will deal with all of your creditors during an approved timetable. This process usually takes several years, but during the entire time you’ll be protected by the automatic stay, which means you shouldn’t have to worry about wage garnishment, phone calls from creditors or repossession and foreclosure. Then, when your timetable is up, all the debts you including in your case will be fully cleared.
Can bankruptcy stop foreclosure?
Absolutely. The automatic stay is a powerful court order designed to stop all forms of collection – including foreclosure. Even if a bank has already taken steps to stop foreclosure, the automatic stay may stop it until your debts are resolved in your case. Typically, the automatic stay kicks in when you file any type of bankruptcy.
What happens to my car when I file bankruptcy?
First, know that if you’re considering bankruptcy your credit is likely lower than you’d like because of late bill payments and collection notices. After you successfully exit bankruptcy any outstanding debts you have should be removed from your credit report. However, bankruptcy will remain on your credit report for several years after your filing.