In this challenging economic climate, consumers are finding it more and more difficult to keep up with their mortgages, medical bills, credit card debt, and even day-to-day living expenses. Many choose to get a fresh start and file for bankruptcy, but most do not know that there are two different types of bankruptcy available to consumers: Chapter 7 and Chapter 13.



Bankruptcy Chapter 7
Put simply, a Chapter 7 bankruptcy is the process someone can use to wipe out his or her debts in exchange for possibly having to give up some of their assets to be liquidated and used to pay creditors. Chapter 7 bankruptcies are often referred to as “liquidation” bankruptcies. However, in most cases debtors are able to keep their assets and not have to give up anything, even a house or a car in the right circumstances. We can tell you what assets you would be able to keep in a bankruptcy during a free consultation.
Not everyone can file for Chapter 7 bankruptcy. The debtor (you) must first show the Court that you qualify to file for Chapter 7 bankruptcy through a financial test called the “Means Test.” The bankruptcy “means test” determines whether your income is low enough for you to file Chapter 7 bankruptcy. In a nutshell the “means test” is a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. Those with income too high to qualify for a Chapter 7 would still be able to file for bankruptcy protection but would have to file a Chapter 13. The “means test” can be a bit complicated, but our attorneys can quickly tell you whether or not you qualify for Chapter 7.
Most debtors who come to our offices are looking for help in preventing creditor law suits, ending garnishments, stopping harassing creditor phone calls, and getting a fresh start. When a debtor files for bankruptcy a “stay” is put in place which prevents the collection efforts of creditors including garnishments and lawsuits. The “stay” is meant to give debtors some breathing room while they go through the bankruptcy process. Most creditors are aware of the automatic stay that comes with the filing of a bankruptcy and know that a violation of the automatic stay can be extremely bad for them. We can help defend against creditor actions by filing your bankruptcy.
The most time consuming part of the bankruptcy process is the preparation of all the documents that must be filed with the Court in order to get the automatic stay. The paperwork required for the “means test” alone is enough to cause most debtors to simply through their hands up in defeat. Those debtors that do manage to fill out the paperwork almost always fail to file everything required and sometimes have their cases dismissed simply because they didn’t know all the rules. We do. We know what forms you need and how to fill them out. And because we file everything electronically with the Court, you don’t have to worry about trying to hand deliver your petition paperwork directly to the Court.
For most debtors the hardest part about bankruptcy is the “unknown” or what to expect once everything is filed. After a debtor’s petition is filed with the Court, a person called a Trustee is assigned to the case to represent the debtor’s creditors. A meeting with the Trustee is automatically docketed and the debtor must meet with the Trustee in person to discuss the petition. This meeting is called a 341 Meeting of Creditors. This may sound scary but in fact it’s very routine and quick. Most of these meetings last 5 minutes or so; just long enough for the Trustee to ask the Debtor some basic questions about the information in the petition. Our attorneys will always be with you at your creditor meeting and prepare you on what to expect before the meeting.
After the 341 Meeting of Creditors, creditors have 60 days to file any objections they may have about their debt being discharged by the Court. The objections must have some sort of legal basis and can’t simply be because the creditor feels that it’s “unfair” for their debt to be discharged. We work with you before you even file your bankruptcy to identify any debt that might have a chance at not being discharged so that we can plan accordingly. After the creditor objection period has passed, the Court will issue a discharge of debts. The discharge prevents creditors from ever again trying to collect on that debt and allows the debtor a true fresh start.
We tell this to everyone who comes in our doors, watch out for the cheap bankruptcies. It’s very easy to find advertising for bankruptcies as low as $299, but as with everything in life, if it’s too good to be true, it usually is. Those clients who come in our doors that have tried the cheap bankruptcy route all report the same things: little to no contact with the attorney, bait and switch tactics, no return phone calls, no one going with the debtor to the 341 Meeting of Creditors, incorrect paperwork, paperwork not filed, etc.


Bankruptcy Chapter 13
A Chapter 13 bankruptcy is different from a Chapter 7 bankruptcy. A Chapter 13 bankruptcy is for those debtors who do not qualify for a Chapter 7 due to the “means test”, or for those debtors who do qualify for a Chapter 7 but have chosen to file for Chapter 13, usually because of a need to save a home from foreclosure or to prevent the Trustee from taking and liquidating some assets that the debtor wants to keep and would lose in a Chapter 7.
While a Chapter 7 bankruptcy is referred to as a “liquidation” bankruptcy, Chapter 13 bankruptcies are referred to as “repayment” bankruptcies. This is because debtors are required in a Chapter 13 bankruptcy to repay a portion of their debts over a period of either 3 years or 5 years. Whatever unsecured debt is left at the end of the repayment period is discharged with some exceptions. We can help you determine which repayment period for which you qualify.
The automatic stay provisions for a chapter 13 are almost identical to those for a Chapter 7 with one big exception. The automatic stay protects the debtor from creditor collection activities, but what about if there is a codebtor? The automatic stay only applies to debtors in a Chapter 7, but in a Chapter 13 it also protects codebtors. This can be a big consideration for debtors filing for bankruptcy that have relatives as codebtors.

Just like a Chapter 7, a debtor in a Chapter 13 must also attend a 341 Meeting of Creditors with a Trustee. The creditor meetings are nearly identical in nature. We will always attend the 341 Meeting of Creditors with you and prepare you before your meeting so you know what to expect. The more you know the less scary the process will seem.

While the time consuming process of either a Chapter 7 or Chapter 13 is the accurate preparation of the bankruptcy petition, the most complicated process is calculating the repayment plan for a Chapter 13. The repayment plan must meet several factors before the Trustee and the Court will agree to it and the calculations can be extremely difficult to understand. Certain debts must be paid in full while others can be paid back pennies on the dollar. Debtors want the monthly repayments to be as low as possible, while the Trustee tries to make it as high as possible. Debtors need an attorney that understands how to keep the payments low and how to negotiate with the Trustee. We are experienced with drafting Chapter 13 repayment plans and know the Trustees. We can even give you a good idea of what your repayments will look like before you even file.
Once all the payments have been made successfully in a Chapter 13 repayment plan, the debtor applies to the Court for a discharge of the remaining debt. This gives debtors the fresh start needed to begin again and get back on their feet.
Because Chapter 13 bankruptcies are much more complicated and time consuming than Chapter 7 bankruptcies we usually charge for them on an hourly basis rather than flat fee. However, in some cases a flat fee can be set up if the case is right. Give us a call to set up a free consultation. Once we learn the facts of your case we can determine if a flat fee is available or if an hourly rate is necessary. Either way, it costs you nothing to find out.


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