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Chapter 13 Bankruptcy: Questions and Answers

What is the difference between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, also known as “Wage Earner Bankruptcy," is designed for individuals and married couples who are able to repay a portion of their debts over time. When you file a Chapter 13 bankruptcy, you will propose a repayment plan to make installments to creditors over three to five years. The time period depends upon whether your current monthly income is less than the applicable state median. In a Chapter 7 Bankruptcy, a debtor may eliminate most or all of his or her debts. Chapter 13 Bankruptcy is generally looked to for relief when Chapter 7 is not an option because the debtors have too much income, or wish to keep property that is either non-exempt under Chapter 7 or exceeds permitted value limits.

When is Chapter 13 Bankruptcy a better option than Chapter 7 Bankruptcy?

Chapter 13 Bankruptcy is the preferred form of bankruptcy relief when a debtor is either ineligible for Chapter 7, or when the debtor has debts that would be non-dischargeable under Chapter 7. For example:

a) You may make too much in annual income to file for Chapter 7 but still qualify for Chapter 13;

b) You may have debts such as student loans or back taxes that would not be discharged under a Chapter 7 bankruptcy;

c) You may be unable to file a Chapter 7 bankruptcy because you received a discharge under Chapter 7 fewer than eight years ago;

d) You may wish to keep property which is either non-exempt or exceeds permitted value limits under Chapter 7;

e) You may have a past due balance on a mortgage or car loan and want to repay those past due balances over time without fear of foreclosure or repossession;

f) Or you may have “disposable income," as defined by the bankruptcy laws, sufficient to repay a portion of their debts over a three-year period of time (or five years for people who do not qualify for Chapter 7).

Can my creditors continue to harass me while I’m in Chapter 13 Bankruptcy?

No, they cannot. Creditors are not allowed to start or continue collection efforts against you while you’re in Chapter 13 bankruptcy.

If I file for Chapter 13 Bankruptcy and I have a joint debt with my wife, can creditors start or continue collection efforts against her?

No, they cannot. The “co-debtor stay" is a powerful tool in Chapter 13 relief. If you are in Chapter 13 bankruptcy and you have a joint debt with your husband or wife, the creditor cannot start or continue collection efforts against him or her. Accordingly, if your spouse is in Chapter 13 bankruptcy and you have a joint debt, the creditor cannot start or continue collection efforts against you. This should provide you with great peace of mind.

What is the difference between Chapter 13 relief and debt consolidation?

Under Chapter 13 relief, you are given the opportunity to catch up on past-due mortgages, car loans, and rent payments. In addition, if you repay your debts through Chapter 13, you are given a predictable payment plan that your creditors are required to accept.

The major difference between Chapter 13 relief and debt consolidation is that Chapter 13 gives you the protection of the U.S. Bankruptcy Code to protect yourself from continued interest, late fees, and creditor harassment.

Why do I need a lawyer to file for bankruptcy?

The bankruptcy process can be confusing and overwhelming, and it is easy for a pro se applicant to inadvertently violate federal law, which can have devastating legal consequences.

Bankruptcy relief involves complicated intersections of Federal and state law, and many non-attorneys find the court-appointed trustees handling their cases to be intimidating and brusque. While a bankruptcy discharge can bring much-needed relief to your family, the process itself can be very stressful. Let the professionals at Gehi & Associates walk you through the process and put your mind at ease.

I’d like to see whether Chapter 7 or Chapter 13 would be right for me. What is the next step?

Let the experts at Gehi & Associates help you determine how to get your finances back on track. Please give us a call at (718) 263- 5999 to set up your free bankruptcy consultation. During your confidential consultation, we will have a conversation about your current financial situation based on your debts, assets, income and monthly expenses. Then, together we will explore the best path for you, whether it’s loan modification, Chapter 7 or Chapter 13 Bankruptcy.

At Gehi & Associates, you will receive patient and comprehensive advice from experts who understand what you are going through. Bad things happen to good people, and it is our job to help you get your finances back on track. Please let us help you.

We are a debt relief agency.

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