Monday, August 18, 2008
Questions About BankruptcyWhat is the difference between Chapter 13 and Chapter 7 bankruptcy?
Chapter 7, sometimes referred to as straight bankruptcy, is a liquidation proceeding where the debtor turns over all non-exempt property to the bankruptcy trustee. The property is then converted to cash for distribution to the creditors. The debtor receives a "discharge" of all dischargeable debts usually within four months. Chapter 7 affects your credit rating for several years, but you are able to get a relatively quick fresh start.
Chapter 13 is also known as reorganization bankruptcy and is filed by people who want to pay off their debts over a period of three to five years. This is appealing mostly to individuals who have non-exempt property they want to keep. It’s also an option if you have predictable income and your income is sufficient to pay your reasonable expenses with some left over to pay off your debts.
Will the creditors ever stop calling me?
By law, all actions against a debtor must stop once bankruptcy documents are filed. Creditors cannot initiate any lawsuits, wage garnishments or telephone calls demanding payments.
If I’m married, will my spouse be affected?
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt. However, in community property states, either spouse can contract for a debt without the other spouse's signature on anything, and still obligate the marital community. The community property states are as follows: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.