Filing Bankruptcy Process
Those who are faced with the overwhelming fact that their debts have grown to such a large amount that they might have to file for bankruptcy. first decision you have to make is which kind of bankruptcy you should file for: Chapter 7 or Chapter 13? While not a bankruptcy attorney, but you need to know the difference between a Chapter 7 and a Chapter 13 bankruptcy so you know what happens.
However getting in touch with a bankruptcy lawyer who can guide you through the complicated procedure of filing for bankruptcy will make sure it goes smoothly. You will have to provide your bankruptcy lawyer with all your personal information in order to put together and file your voluntary petition. Once the documents are filed at the bankruptcy court, you will be assigned a trustee who will see to it that all the information that is needed is collected from you and that all the information provided is accurate. The next step would be to notify your creditors that you will be filing for bankruptcy so that they will have to stop all actions they might be taking up against you to get your payments. it is almost like someone builds a wall of barriers around the house. No one can touch you. However, you are not free of all responsibility and most people do not understand that. Procedures include meeting with the various parties who are involved in your bankruptcy case, together with your creditors and if possible your creditors lawyers.
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Many people use bankruptcy as a scare tactic. There are several different "chapters" of bankruptcy. Some are work-out others are wipe-out, but here is the general idea. When someone files for bankruptcy using Chapter 7 or Chapter 13. These are the most common used when working with real estate situation. Chapter 7 is the "wipe out" and Chapter 13 is the "work out". Bankruptcy is a federal court action designed to help individuals repay their debts or eliminate their debts depending on their circumstances. Chapter 13 bankruptcies are designed to reorganize debts in an effort to repay all debt. Chapter 7 bankruptcies are geared more towards liquidation of assets. Both Chapter 7 and Chapter 13 immediately stop the foreclosure process and any creditors from taking further action against you.
When someone files a Chapter 7 bankruptcy, all assets are frozen. The attorney will create what is called an automatic stay. Meaning everything "Stays" put. The homeowners can't buy anything, they can't sell anything, and they can't even give away anything. If they try to sell their home, they couldn't. If they try to give away money in savings, they can't. Any unsecured debt like credit cards, unsecured loans, etc. are eliminated or wiped out. They do not exist anymore. Then the trustee or attorney who represents the court and the creditors will look at all the assets (house, car, furniture, equipment) anything of value and decide what must be liquidated to pay some of the debt that was wiped out.
If the homeowners are in the middle of foreclosure, a Chapter 7 will stop the foreclosure process. Usually banks will then ask the trustee to release the property from the automatic stay so they may continue with the foreclosure process. Once the property has been released from the bankruptcy, the foreclosure process starts right where it left off. Typically you have anywhere from 3-5 weeks until the foreclosure process begins again.
Chapter 13 is a little different. When someone files a Chapter 13, they don't take all the assets and sell them. Instead they take all the monthly payments and discount them for penny's on the dollar. It's like a debt consolidation plan. Whatever amount is agreed upon has to be paid to the bankruptcy count every month for the next 3-5 years. So the homeowners get to keep their house, their cars, and all their assets. Now, as long as the homeowner stays current with the mortgage payments and pays the amount agreed upon, they will be fine. However, if any payments are missed, the trustee will dismiss the bankruptcy and the foreclosure process will begin again.
With this knowledge hopefully, you now understand bankruptcy better and can make the right decision. Keep in mind that filing for bankruptcy is a long process which will require a lot of patience. For this reason, having an experienced lawyer might make sure that everything runs smoothly.
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