When considering bankruptcy or chapter 13 as an option, many people are concerned about whether or not they might lose valuable property including their houses, cars, boats, bank accounts, cabins, retirement accounts and other possessions. Before you jeopardize your future by borrowing against your home to pay debts, cashing out your retirement accounts or 401k plans or otherwise borrowing against them to pay your debts, you must consider your options and consult with a bankruptcy attorney. A knowledgeable attorney who concentrates his or her practice in the area of debtor-creditor law is a valuable source of information on how to protect your assets through the bankruptcy process. Before making any final decisions regarding debt payment plans, cashing out retirement plans or bankruptcy options, you should contact the attorneys at Neighborhood Legal Centers to discuss how to protect your assets when your financial wellbeing is at stake.
There is no minimum amount that a person must owe in order to file bankruptcy. Every person’s financial situation warrants an individual approach by their attorney on a case by case basis.
Cars and other vehicles that are financed are subject to repossession if you fall behind on your payments. If you are current with your payments and you do file a chapter 7 petition, you should be able to retain your vehicle while continuing to make the regular payments. If you have fallen behind and your vehicle is repossessed, chapter 13 will force the creditor to return the vehicle to you. Chapter 13 can also reduce the balance, interest rate and monthly payment on your vehicle.
If your home is in foreclosure and going to be sold at a sheriff’s sale, either chapter 7 or chapter 13 will stop the sale. If you want to keep your home and you are not current with your payments, chapter 13 will allow you to set up a repayment plan over time to catch up the delinquent mortgage payments. If you are current with your mortgage payments when you file bankruptcy, you will most likely be able to save your home unless there is substantial equity in your property, which would mean that the value of the property far exceeds the outstanding debt against the property. However, if you are behind on your mortgage and you do file a chapter 7 petition, the mortgage company will ask for permission to foreclosure from the bankruptcy court. Any balance owed after foreclosure will be eliminated by the bankruptcy filing. If you are behind on your mortgage payments and in foreclosure, chapter 13 may be the best option available to you to set up a repayment plan over time and keep ownership of your home, unless you can complete a successful loan modification process with your mortgage company. Sometimes mortgage companies make promises that they do not keep with regard to loan modifications.
Both wage garnishments and garnishments other than personal earnings (bank attachments) will be stopped immediately upon the filing of a chapter 7 or chapter 13 bankruptcy. The automatic stay forces creditors to immediately stop collection activity once your bankruptcy case number is issued by the court.
Retirement accounts such as a 401k, pensions and most profit sharing associated with retirement plans are protected assets that cannot be taken by the bankruptcy court to pay your creditors. Therefore, if you file bankruptcy, in most circumstances you will be able to keep your retirement plan.
If you file chapter 7 or chapter 13, you can put delinquent utility bills in your case and prevent shutoffs. If your utilities are shut off, the utility companies must restore service when you file. They usually require a security deposit.
The filing of bankruptcy does have a negative impact on your credit rating. However, most people that file bankruptcy already have poor credit ratings. Therefore, the bankruptcy will discharge all of your debts and give you the opportunity to have a fresh start and rebuild your credit over time. In many instances, creditors are now offering credit to people that file bankruptcy. For example, you may be offered a small balance credit card account or a car loan after bankruptcy. If you choose to take advantage of these opportunities, you can begin to rebuild your credit score. Although bankruptcy stays on your credit for 10 years, there is life after bankruptcy.
If the IRS has attached your wages, filing bankruptcy will stop collection efforts from the IRS. Some taxes can be discharged in bankruptcy. Others can be paid back through chapter 13.
There is generally one appearance required at the bankruptcy court. However, you do not see a judge but meet with a chapter 7 or chapter 13 trustee. This person is appointed to review your case to make sure that the information in your bankruptcy petition/paperwork is accurate. It is also the job of the bankruptcy trustee to recover assets for creditors. However, most cases are no assets cases as most property is exempt, which means that the court cannot take the property from you when you file bankruptcy.
The filing of the bankruptcy or chapter 13 petition immediately puts a halt to creditors contacting you at night, suing you, garnishing your wages, attaching bank accounts, putting a lien on your property, foreclosing and repossessing your vehicles. It is important to meet with the attorneys at the Neighborhood Legal Centers, who are knowledgeable, compassionate and willing to give you advice regarding your options.
Many clients when considering bankruptcy instead choose to enter into debt repayment plans. Although some plans are legitimate, many will charge you exorbitant fees up front and not begin negotiating with your creditors until they have accumulated thousands of dollars. In the meantime, you can be sued by creditors who can then obtain a judgment and garnish your wages while you are paying the debt consolidation agency. You need to be very careful about working with out-of-state agencies. If your finances have reached the point where you are already behind with your payments to creditors, paying debts to a debt consolidation agency who in turn may not send money to your creditors for months will serve only to worsen your situation. Therefore, it is imperative that you consider all of your options first before getting into a debt repayment program, since it simply may not help you resolve your debt issues and provides you with a fresh start that you can obtain through the bankruptcy process.
Please contact Neighborhood Legal Centers in northeast Ohio by phone or email to schedule an initial consultation regarding asset protection and debt relief provided through a chapter 7 or chapter 13 proceeding.