Will bankruptcy wipe out all of my debts?

It depends on the kind of bankruptcy. With liquidation bankruptcy, like Chapter 7, you can ask that your debts be discharged—in other words, that they be wiped out. This may require surrendering some property to sell to satisfy creditors. Chapter 13 requires repayment of some debts, in part or in full, but is spread out with a payment plan. Some debts are never discharged with bankruptcy, such as child or spousal support and tax debts. Student loans are only discharged if you provide evidence that paying them constitutes an undue financial burden; discharge of student loans is rare.

What’s the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 bankruptcy is a liquidation form of bankruptcy. That means that many debts are discharged, and the remaining liabilities are paid off with proceeds from the sale of non-exempt assets. As you can guess, Chapter 7 results in loss of property, though many assets can be saved through state exemption laws. Eligibility for Chapter 7 is based on means, so if you’re above a certain income level, you will have to file for Chapter 13. Chapter 13 bankruptcy establishes a repayment plan, typically taking place over 3 to 5 years, during which you pay back creditors for what you can afford. Some debts are discharged, others are paid back only partially, and others are required to be paid in full. The specifics of your payment plan depend on your income and assets.

Reorganize Your Debt with Our Chapter 13 Bankruptcy Attorneys

Financial troubles can be sneaky. Sometimes life simply intervenes — an unexpected medical situation, a divorce, a job loss — and suddenly you find yourself behind on payments, with creditors calling and bills piling up. When this happens, bankruptcy can be the most efficient, effective solution to get you back on track. Chapter 13 bankruptcy may be the best option for you depending on your individualized circumstances. Often referred to as “reorganization bankruptcy,” Chapter 13 allows you to restructure and pay down a percentage of your debts over a certain period of time, usually three to five years. At Perez Law Group, PLLC, Arizona residents can speak to a seasoned Chapter 13 bankruptcy lawyer in Glendale, AZ to find out what is best for you.

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How Does Reorganization Work?

While Chapter 7 deals with unsecured debts, like credit cards and medical bills, Chapter 13 can help address secured debts, such as mortgages or auto loans. Secured debt refers to loans in which collateral is involved. Should a debtor become delinquent in payments, the creditor has the option to seize or foreclose on the asset that was put up for collateral as repayment. In the case of a mortgage, that collateral is the house itself, which means creditors can foreclose on a house. Likewise, a car can be repossessed if payments aren’t made on the auto loan.

Filing for Chapter 13 bankruptcy accomplishes several things:

Creditors must cease attempting to collect. If you’re flooded with calls and letters, and fearful of losing your assets, filing for bankruptcy immediately stops those collection efforts. You have room to breathe.
A payment plan is established. Debt can seem overwhelming; reorganization makes it more manageable, allowing you see how you’ll pay off what you owe over a specific period of time.
No interest is accrued on most debts. During your Chapter 13 bankruptcy process, interest does not accumulate on most of your debts.
The debtor has no contact with creditors. Worried about facing those aggressive creditors you’ve had on the other end of your phone for months? Don’t be! Under Chapter 13, you will make your payments to a trustee, who will then distribute the payments to the creditors. That middleman ensures you don’t have to directly interact with creditors.
You keep your stuff! Chapter 13 allows a person to keep their assets. That is the beauty of the Chapter 13. Debt collection is stopped upon filing this form of bankruptcy, so you can save your house, car, or other secured assets by filing.

Once a payment plan has been completed, any remaining part of the debts will be discharged — in other words, they’ll be wiped away.

How Do I Qualify for Chapter 13?

Speak to an experienced attorney to discuss whether Chapter 13 is right for you. If you’ve fallen behind on mortgage or auto payments or have other late payments such as alimony or child support, Chapter 13 will provide you with the time to get back on top of those payments without facing stiffer consequences. Chapter 13 can be the best option for those who need to press pause and catch up.

Is Chapter 13 Right for Me?

A skilled bankruptcy attorney can not only help you better understand your options, but also provide you with individual attention to find the solution that best suits your unique situation. The Chapter 13 bankruptcy lawyers at Perez Law Group, PLLC, understand that life happens. Sometimes you need a break to refocus, reorganize, and restart. Fill out the form below or call (602) 730-7100 to speak to one of our debt relief attorneys today.

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