CHAPTER 7 BANKRUPTCY
Bankruptcy is an ever-changing field of law. Recent legislative changes have made it more difficult to file bankruptcy, but still allow for most individuals to file bankruptcy. The need for bankruptcy, however, still exists. The increased costs of medical care, combined with declining wages and an uncertain job market, mean that debt often becomes too much for a family to bear. Given these circumstances, a family has only a few options -- sell the family home, get a second or third job, or declare bankruptcy. When you declare bankruptcy, you are making a legal statement that your debt and expenses exceed your income.
Bankruptcy is not a bad or negative thing. It is a financial decision. Corporations do it everyday. United Airlines, General Motors, and MCI are just a few of the companies that declared bankruptcy. Declaring bankruptcy is better than making your family suffer or losing your family home. Bankruptcy is a right in our Constitution and it is also mentioned and supported in the Bible. Even in the Biblical Days, creditors were trying to take advantage of helpless debtors. There are two types of bankruptcy generally filed by consumers: Chapter 7 and Chapter 13. Summaries of each are included below.
Chapter 7 Bankruptcy allows for the following:
- Also called liquidation bankruptcy
- In most situations keep your home
- Credit card debt is eliminated
- Medical bills are eliminated
- Allows you to get a fresh start
- Credit repair often happens in less than two years
- Foreclosures are stopped
Example 1
A single man has a home that is 4 months behind on the mortgage. His monthly payment is $700. Therefore, he is $2100 behind. Plus, the mortgage company has started foreclosure proceedings and there is another $1000 in attorney fees for the mortgage company. Thus, the single man is $3100 behind on the mortgage. His house is worth $40,000 but he owes $200,000. In addition, he has $20,000 in credit card debt and $5,000 in medical bills. He lives alone (household size of 1), has an annual income of $30,000 (below average income), and has very little in the way of assets. He wants to walk away from his home.
Under a Chapter 7 Bankruptcy, the gentleman would probably pay back none of his credit card or medical debt. The bankruptcy filing would delay the foreclosure process and he won't have to worry about harassment from creditors and thousands of dollars of judgments.
Example 2
A single woman has $30,000 in credit card debt and is currently renting an apartment. She has few assets. Under Chapter 7, she can walk away from the debt and start fresh.
Example 3
A husband and wife have very few assets but they are current on mortgage payments for their family home, which has $30,000 equity. They owe $50,000 in credit card debt, but because the wife has lost her job, they can only afford to make mortgage payments not the credit card payments. If they file a Chapter 7 Bankruptcy, they can keep their house and get rid of their debt. Sound too good to be true? It's the law. The mortgage and credit card companies don 't want you to know your legal rights. It's easier for them to garnish your wages, seize your bank accounts or put judgments on your home. You can simply give up or you can get informed about your rights. The choice is yours.