Many times couples and individuals do not know when to consider bankruptcy – Chapter 7 or Chapter 13. Should you file bankruptcy? Should you file now? Hopefully this checklist may help.
- Are debt collectors constantly calling or writing you concerning a large portion of your debt? If debt collectors are constantly calling you and stressing you out concerning your debts, it is time to consider bankruptcy. Debt collectors are only employed by credit card companies when your debts to them are in default. There is no chance to negotiate here with your credit cards.
- Have you been sued by a credit card company? If you have been sued by a credit card company and are awaiting your hearing date in court, you should immediately consider bankruptcy. This step will occur after debt collection was unsuccessful. That is, debt collectors were unable to get you to accept a monthly payment plan with them. The credit card company has chosen to employ an attorney to obtain a judgment against you. That judgment will be reported by credit reporting agencies like Experian for 7 years.
- Are your wages going to be garnished? After a judgment is obtained against you, the credit card companies will attempt to garnish your wages if you are employed. They will obtain an order from the Sheriff’s office in the county in which you live and serve the order on your employer. Credit card companies will generally take 25% of your pay.
STOP ALL COLLECTIONS
Bankruptcy – both Chapter 7 and Chapter 13 – will immediately stop the credit card companies from collecting the debts against you. This means that once you file your bankruptcy, all debt collectors must cease calling and writing you. Credit card companies must dismiss its lawsuit against you once you have filed for bankruptcy. Finally, they may not proceed to garnish your wages.
CHAPTER 7 FRESH START
Chapter 7 is sometimes called a “liquidation” or “straight” bankruptcy. In Chapter 7, a consumer debtor, such as yourself, obtains a discharge of all debts. A discharge is an order of the bankruptcy court stating that you are released from debt, such as a credit card bill. In other words, the debt is wiped out and you no longer owe the creditor any money. In general, you may keep your car in Chapter 7 bankruptcy if you wish to do so and you are current on your monthly finance payments.
CHAPTER 13 DEBT CONSOLIDATION
In Chapter 13, a consumer debtor completes a plan to repay his or her creditors. The plan in Chapter 13 is sometimes referred to as a “Wage Earner Plan.” The debtor proposes a plan of repayment to his creditors over a period of between three to five years. The plan will provide for regular monthly payments to be administered by a Chapter 13 Trustee. A Chapter 13 plan does not have to pay 100% owed to all of your credit cards. It may propose that you only pay a fraction of the total amount owed without interest.