There are three types of debt; secured, priority unsecured, and unsecured. A car loan is an example of a secured debt in which the vehicle is the collateral for the loan. The mortgage on your house is also secured debt. Examples of priority unsecured debt are child support and spousal support. In almost all cases, secured debt and priority unsecured debt must be repaid in full in a Chapter 13 bankruptcy filing. Some examples of unsecured debt are credit cards and medical bills. In a Chapter 13 filing this debt is repaid based on what can be reasonably afforded.

After a careful review of your debt and financial situation including income and expenses, you and your lawyer may determine that a Chapter 13 bankruptcy filing is the best thing for you to address your debt. If so, a bankruptcy plan will be developed with your lawyer and presented to the court for approval. This will include a three-to-five year plan. The plan will outline monthly projected income, necessary monthly living expenses, and payments to cover all monthly secured and priority unsecured debt. The remaining monthly income will be used to pay only the unsecured debt you can afford to pay. Remaining unsecured debt will be discharged at the end of the bankruptcy period.

Following are questions and answers for 9 types of personal debt:

1.Will I lose my house when I file for Chapter 13 bankruptcy?
In general, you can keep your house. However, you will need to make monthly mortgage payments as well as catch up on past due payments during the bankruptcy plan period. Your lender will establish a mortgage modification that includes the missed payments spread out over the three-to-five year period. You may also be able to keep your house if it is in foreclosure if you file for bankruptcy before it is sold and make monthly payments including the late payments.

2.Will I lose my retirement funds when I file for Chapter 13 bankruptcy?
In most cases you can keep the money in your pension and retirement plan funds. However, these need to be ERISA-qualified retirement accounts such as 401(k)s, IRAs, Keoghs, and defined benefit plans. Investment accounts, stock option plans and savings accounts will be covered only if they qualify under ERISA which may or may not be the case.

3.Will I lose my vehicle(s) when I file for Chapter 13 bankruptcy?
Monthly auto loan payments must continue to be paid in bankruptcy. If the payments cannot be made, the lender will repossess the vehicle.

4.Will Chapter 13 bankruptcy enable me to get rid of my medical bills?
In most cases, you will pay off a portion of your medical debt during the bankruptcy period and the remainder will be discharged at the end of bankruptcy. The amount paid will be based on the repayment plan that is established for your bankruptcy and will be based on what you can reasonably afford to pay based on income, living expenses, and secured and priority unsecured debt.

5.Will Chapter 13 bankruptcy get rid of my student loans?
Student loans typically cannot be discharged/cancelled in bankruptcy. There are rare cases, such as situations involving “undue hardship”, where student loans may be discharged. There are also certain types of loans associated with education expenses that may be dischargeable.

6.Is spousal support and child support affected by Chapter 13 bankruptcy?
The obligations for payment of spousal and child support do not change with the Chapter 13 bankruptcy filing.

7.Will my credit card debt go away if I file for Chapter 13 bankruptcy?
In most cases, you will pay off a portion of your credit card debt during the bankruptcy period and the remainder will be discharged at the end of the bankruptcy. The amount paid will be based on the repayment plan that is established for your bankruptcy and will be based on what you can reasonably afford to pay based on income, living expenses, and secured and priority unsecured debt.

8.How are federal and state taxes treated in Chapter 13 bankruptcy?
Past due taxes are usually treated as “nondischargeable priority debt”. Bankruptcy will not eliminate the tax obligations, and repayment of the tax debt is prioritized in the plan. There are, however, certain situations where taxes are considered a “dischargeable” debt that can be eliminated in the filing. This involves rules regarding the age of the tax debt, timing of tax returns and other factors.

9.How are personal loans affected in Chapter 13 bankruptcy?
Personal loans from family members, friends, and employers are all dischargeable in a Chapter 13 bankruptcy filing. In addition, unsecured bank loans, payday loans and signature loans from loan companies are also dischargeable in a filing.

If you are facing the possibility of a Chapter 7 or Chapter 13 bankruptcy filing, the chances are you are probably feeling a lot of stress and sleepless nights. If you want to start getting your financial situation in order contact Dozier Law, P.C., experienced Bankruptcy Attorneys in Rincon, Effingham County, Chatham County, Bulloch County, Screven County and Bryan County, Georgia. Your initial Bankruptcy consultation will be no charge to you.

1. How do I obtain relief from my creditors?
For certain people, filing a bankruptcy case will achieve the relief from debt that they seek because this can result in the grant of a discharge of debts to an individual. A discharge is the forgiveness of personal liability for debts which have been incurred prior to the filing of the bankruptcy case. With few exceptions, creditors are prohibited from suing a debtor, obtaining a judgement or collecting for debts which have been discharged and will have no claim on the future income or assets of the individual who has filed for bankruptcy relief as a debtor.

Bankruptcy, while it may relieve a personal obligation to repay a debt, does not eliminate most mortgages or liens on property. Thus, in order to retain a car or a house which has been pledged as collateral on a loan, a debtor will ordinarily have to repay the creditor the full amount of the debt over time or redeem the property by paying the full value of the collateral in cash to the creditor.

2. What are my alternatives?
Individuals may choose several different types of bankruptcy. The choice of Chapter 7 or Chapter 13 will depend upon the financial circumstances of the debtor, the amount and nature of the debts to be dealt with in bankruptcy, the exemptions available and the types of assets owned by the debtor.

3. What is Chapter 7 bankruptcy?
Chapter 7 is what most people refer to as “straight bankruptcy”. In a Chapter 7, the debtor turns over all of his or her non-exempt assets to a Chapter 7 trustee. The Chapter 7 trustee liquidates those assets and distributes the proceeds to the debtor’s creditors. By order of the Bankruptcy Court, the person is then discharged from all debts.

4. How do I benefit from a Chapter 7 bankruptcy case?
Once you file your case, your creditors are prohibited from continuing suits against you or from attempting to collect their claims against you and your property. Rather, creditors must look solely to the Bankruptcy Court and the assets within its control for payment of their claims. By filing the Chapter 7 bankruptcy case and obtaining a discharge, you receive a total forgiveness of the discharged debts and receive a “fresh start”.

5. What are the differences between Chapters 7 bankruptcy and Chapter 13 bankruptcy?
Chapter 7 of the Bankruptcy Code is entitled “Liquidation” and, as the name implies, generally requires sales or foreclosure of all property except property deemed to be exempt. In most instances, the Chapter 7 debtor is promptly discharged from all or most pre-bankruptcy debts and receives a fresh start on a new economic life. This new economic life frequently begins only with exempt assets.

Chapter 13 bankruptcy is entitled “Adjustment of Debts of Individuals with Regular Income.” It is often called “wage earner” or just “Chapter 13”. Chapter 13 debtors pay all or part of their debts through future income rather than through liquidation or foreclosure of present assets. Chapter 13 is available only to individuals with regular income whose non-contingent, liquidated unsecured debts are less than $250,000 and whose secured debts are less than $750,000. Corporations and partnerships are not eligible for Chapter 13 bankruptcy. The Chapter 13 debtor’s income must be regular, but can come from such things as self-employment, pension, welfare or alimony.

6. How does Chapter 13 bankruptcy work?
Under Chapter 13 bankruptcy, the debtor presents a plan of debt repayment which is reviewed by the Chapter 13 trustee, creditors and the Bankruptcy Court. The plan must be filed in good faith, must provide for payments that are feasible in light of the debtor’s income and expenses and must also provide for payments over time that are equal in value to the money creditors would have received if the debtor had chosen Chapter 7 liquidation instead of Chapter 13. The plan must also provide that, for a period of three years, all of the debtor’s income above reasonable expenses will be used to pay debts.

If the Chapter 13 plan is approved, all payments are made through the Chapter 13 trustee’s office, and the trustee is paid a commission. Most plans must run at least three years and cannot exceed five years. Chapter 13 provides that the debtor receives a discharge from most pre-bankruptcy debt upon making the payments called for by the plan.

7. Can I keep my property when I file for bankruptcy?
Chapter 13 debtors often keep property they would lose in a Chapter 7. Keeping secured property in a Chapter 7 usually requires the creditors’ agreement. Secured creditors do not have such control in a Chapter 13.

Consequently, Chapter 13 debtors usually keep their cars, house and other important property subject to security interests, even if the creditor wants the property back. Property not subject to security interests can also be kept in a Chapter 13, even though its value is not exempt and would be lost in a Chapter 7.

8. Who will find out if I file for bankruptcy?
In most cases, only you and your creditors will know that you have filed for bankruptcy. Even though bankruptcy proceedings are a matter of public record, this information rarely gets publicized unless you are affiliated with certain high profile organizations, hold a public office or have a high profile job.

Of course, your creditors will be notified of the bankruptcy, and the information will be shown on your credit profile that will be accessible by future lenders. Your employer is usually not privy to the information unless you are having Chapter 13 payments automatically deducted from your paychecks. While rare, some smaller communities may publish notices of bankruptcy filings in the local newspaper. However, that practice is typically considered distasteful and outdated by most modern news agencies.

9. What information do I need to provide to file Chapter 7 or Chapter 13 bankruptcy?
Following is a checklist of information required for filing bankruptcy.

1. Proof of Income
a. Last 6 months pay-stubs
b. Last 2 years tax returns

2. Proof of debts
a. House loan – current statement
b. Vehicle loan – current statement
c. Personal loans – statements and credit agreement
d. Payments on account to retail merchant – statement and credit agreement
e. Credit cards – monthly statements
f. Medical – statements and/or letters
g. Letters turned over to collections
h. Taxes – letters from IRS, GA and County
i. Child support/alimony – court orders and letters
j. Other debts – statements and/or letters
k. Credit report (optional)

3. Proof of value of assets
a. Recent appraisals on house/land
b. County tax appraisals
c. Car/truck registration

4. Proof of identification
a. Driver’s license
b. Social security card

5. Other documents
a. Leases/contracts
b. Court documents re. lawsuits
c. Last 2 months bank statements for all accounts

The information on this checklist will provide the details necessary for a liquidation of assets under a Chapter 7 bankruptcy or a debt repayment plan under a Chapter 13 bankruptcy.

If you are facing the possibility of a Chapter 7 or Chapter 13 bankruptcy filing, the chances are you are probably feeling a lot of stress and sleepless nights. If you want to start getting your financial situation in order contact Dozier Law, P.C., experienced Bankruptcy Attorneys in Rincon, Effingham County, Chatham County, Bulloch County, Screven County and Bryan County, Georgia. Your initial Bankruptcy consultation will be no charge to you.