CHAPTER 7 VS. CHAPTER 13

CHAPTER 7 VS. CHAPTER 13
Which one is best for you?

What is Chapter 7 Bankruptcy?

A Federal Law designed to provide help and protection if you are desperately in need of relief from your overwhelming financial burden.

It involves eliminating (liquidation) for all or part of your debt.

After a FREE consultation, Gamm Legal Services will make a determination if you qualify for
“emergency relief” with the Federal Bankruptcy Court that will:

• • Stop all collections and garnishments against you... right away,
• • And keep your creditors from taking any more of the hard-earned money you can’t afford to lose.

Here's some good news: under a Chapter 7 petition,

Will getting out of paying all these burdensome bills ruin your credit score?

Not necessarily. When you do away with the bills you owe, a fresh start might increase your credit score within the year following filing, rather than being bogged-down with a low credit score and debt for a number of years yet to come. Credit reports are based on debt ratios; when you eliminate debt with a bankruptcy this generally will cause an increase in your credit score after the filing of your case. Filing for bankruptcy is bad for your credit because there is a 7-10 years search for bankruptcies on most major credit reports . (Most report for 8 years).

Can you afford to file Chapter 7 bankruptcy?

Absolutely…first of all, my personal consultation is FREE 24/7. I don't charge extra for evening or weekend help. Then, if you use my firm, my help is based upon a fee, which can be a big cost-saving over what other attorneys charge.

Eligibility for Chapter 7 filing

• • To qualify for relief under chapter 7 of the Bankruptcy Code, you can be an individual, a partnership, a corporation or other business entity.
• • Relief is available under chapter 7 without taking into account the amount of monies owed or whether you have enough money to cover your debts or not.
• • You cannot file under chapter 7 (or any other chapter) if during the previous 180 days another bankruptcy petition was dismissed.
• • You cannot file under chapter 7 (or any chapter of the Bankruptcy Code) unless you have, within 180 days before filing, received credit counseling. This includes counseling from an approved credit counseling agency, or in an individual or group briefing. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has decided your counseling came from a non-approved agency.

Keep in mind, chapter 7 cases discharge individual debtors, not partnerships or corporations.

While an individual chapter 7 proceeding typically results in a discharge of debts, the absolute right to a discharge is not definite, as some forms of debts are not discharged.

In addition, a bankruptcy discharge does not discharge a lien on property.

What is Chapter 13 Bankruptcy?

It is a means of rearranging (“restructuring”) your existing financial obligations in a way that gives you some breathing room.

For example, if you are afraid of losing your house, a Chapter 13 petition will... immediately stop any foreclosure on your family's home.

By the way, if you have other “unsecured” debts such as credit cards, these are often wiped-out.

My fee is based on the amount of work we must do, and the balance is paid to us through your reorganization plan over a period of up to 5 years. If you have other “secured creditors,” you will also have up to 5 years to pay them off.

Courts have set a Standard Allowable Amount (SAA) for attorney fees in Chapter 13 cases. So, attorneys in Nebraska charge the same amounts for chapter 13 cases. This means that you will want to find an attorney you trust and get along with because they could be your voice for the next 5 years. Regardless of the upfront charge, all attorneys under the SAA are paid the same, so do not let fees be the deciding factor in your choice of an attorney.

Advantages of Choosing Chapter 13

Chapter 13 offers you a number of distinct advantages over liquidation under chapter 7.

As mentioned previously, this plan provides you an opportunity to save your home from foreclosure. By filing under this chapter, you can stop foreclosure proceedings and then “make-up” delinquent mortgage payments over time. But, you still must make all mortgage payments on time while the chapter 13 plan is in place.

Another advantage of chapter 13 is that it allows you to reschedule your secured debts by possibly lowering your payments.

Chapter 13 also has a special provision that protects third parties who are liable along with the debtor on "consumer debts." This provision may protect any of your co-signers.

Finally, chapter 13 acts like a consolidation loan under which you make the plan payments to a chapter 13 trustee who then distributes payments to your creditors. You will have no direct contact with creditors while under chapter 13 protection.

Eligibility for Chapter 13 Filing

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as your unsecured debts are less than $383,175 and secured debts are less than $1,149,525.

These amounts are adjusted from time to time to reflect any changes in the consumer price index. A corporation or partnership cannot file for a chapter 13 plan.

Just like Chapter 7, an individual cannot file under chapter 13 (or any other chapter) if, during the preceding 180 days, a prior bankruptcy petition was dismissed.

Remember, no individual may be a debtor under chapter 13 (or any chapter of the Bankruptcy Code) unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency, either in an individual or group briefing.

If a debt management plan is developed during required credit counseling, it must be filed with the court.


Preparing a Plan for a Chapter 13 Confirmation Hearing

• 1. Unless the court grants you an extension, we must file a repayment plan with the petition or within 15 days after the petition is filed.
• 2. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis. This is typically biweekly or monthly.
• 3. The trustee then distributes your funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.

There are three types of claims: priority, secured, and unsecured.

• • Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding.
• • Secured claims are those for which the creditor has the right take back certain property (the collateral they hold) if the debtor does not pay the underlying debt.
• • Unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.

Your plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim.

If you want to keep the collateral securing a particular claim, the plan must provide the holder at least the value of the collateral.

If your obligation of a secured claim was used to buy the collateral (such as a car loan), and the debt was incurred before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral…as it’s possible the actual value may be less due to depreciation.

Payments to certain secured creditors (such as your home mortgage lender), may be made over the original loan repayment schedule (which may be longer than the plan) so long as any deficiency is made up during the plan.

When you consult with me, we’ll determine the proper treatment of secured claims in your plan.

Your plan doesn’t have to pay unsecured claims in full as long as you can pay all projected "disposable income" over a commitment period and as long as unsecured creditors receive at least as much as they would receive if you were liquidating under chapter 7.

If they would receive nothing under chapter 7 liquidation…chances are your unsecured debts will be discharged.

A Word About Qualifying for a Chapter 13 Hardship Discharge

After confirmation of your plan, circumstances may arise that prevent you from completing it.

In such situations, you may ask the court to grant a "hardship discharge." Generally, such a discharge is available only if:

• (1. Your failure to complete plan payments is due to circumstances beyond your control and through no fault of your own.
• (2. Creditors have received at least as much as they would have received in a chapter 7 bankruptcy.
• (3. Modification of the plan is not possible. Injury or illness might keep you from employment sufficient to fund even a modified plan. Any of these reasons might serve as the basis for a hardship discharge.

Listen, I know all of this information can be confusing and difficult to understand. Give me a call (Chris) right now at 402.659.4254.

Please notice, I didn't say you need to call me between 8am and 5pm to make an appointment or see me; I'm here for you 24/7, because I know the anxiety you're feeling...at this moment.

"Whether it's noon or midnight, Wednesday or Sunday, I'm here to help right now: 402.659.4254. Together we can decide if Chapter 7 or 13 is best for yourself or your family."