In a Chapter 7 bankruptcy your debts are discharged (wiped out), and you get a “Fresh Start”. If you have a lot of credit card debt and are unable to make the payments, filing for a Chapter 7 Bankruptcy could be the best solution in resolving your debt.
In most Chapter 7 cases, the debtor has large credit card debt and other unsecured bills and very few assets. In the vast majority of Chapter 7 bankruptcy cases, a debtor is able to completely eliminate all of these debts.
Certain debts cannot be discharged in a Chapter 7 bankruptcy, such as alimony, child support, fraudulent debts, certain taxes, student loans, and certain items charged.
Most debtors without assets are able to “exempt” (keep) all or most of their property, including their houses and cars. However, surrendering (giving up) certain property that is “underwater” (the debtor owes more than the property is worth) may be a better option for some debtors.
You may keep certain secured debts such as your car or your furniture or house by reaffirming those debts. To do so, you often have to sign a voluntary “Reaffirmation Agreement.” If you decide that you want to keep your house or your car or your furniture, and you reaffirm the debt, you cannot bankrupt (or wipe-out) that debt again for eight years. You will still owe that debt and you must continue to pay it just as you were obligated to continue to pay it before you filed bankruptcy. In order to reaffirm the debt, you must also bring it current. In other words, if you are three or four months behind, then you must pay the back payments which are due in order to reaffirm it. You can selectively reaffirm your debts – you can state that you wish to keep the house and the furniture, but that you want the car and the jewelry to go back to the respective Creditors.
Making decisions about whether or not to file bankruptcy can be difficult, and the Law Office of Norman J. Barilla can assist you with understanding your options, the implications of certain choices, and assist you in filing for bankruptcy.
Frequently Asked Questions
What is Bankruptcy?
Bankruptcy is a legal proceeding in which an individual who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.
What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
- Prevent repossession of a car or other property or force the creditor to return property even after it has been repossessed.
- Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
- Restore or prevent termination of utility service.
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
What Doesn’t Bankruptcy Do?
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of “secured” creditors. A “secured” creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, some student loans, court restitution orders, criminal fines, and some taxes.
- Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
Is Pennsylvania Chapter 7 (Straight Bankruptcy) Bankruptcy Right for Me?
In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for you giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt, likely including your house and car. But property which is not exempt is sold, with the money distributed to creditors. However, if you are behind on the payments on a mortgage or car loan and want to keep that property, a chapter 7 case may not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.
Contact the Law Office of Norman J. Barilla today to discuss whether bankruptcy is the right choice to resolve your debts.