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How Does Bankruptcy Work?

It can be intimidating to think about filing for bankruptcy without understanding the process. Both Chapter 7 and Chapter 13 are options for individuals to either liquidate their assets to pay off their debt or keep their assets but create a plan to negotiate their debt or pay it off at a much slower rate. Chapter 13 and Chapter 7 are two different forms of bankruptcy, and the processes differ.
I have been helping people resolve their debt since 1998. As the principal of my own firm, the Law Offices of Michael H. Johnson, P.A., I have helped hundreds – if not thousands – of people get a new start.

Steps In The Chapter 13 Process

Chapter 13, also called “reorganization,” is a good option for people who have a steady income and who can pay off a percentage of their debts in a repayment plan. There are five basic steps to the Chapter 13 process:

  1. You file for bankruptcy.
  2. You may be required to take a debtor education course.
  3. You will create and propose a repayment plan to your creditors and the court.
  4. The court must confirm your repayment plan.
  5. At the end of your repayment plan, your remaining debts will be wiped out.

Some people do not qualify for Chapter 13 because they are not able to pay down their debts, given their current income. The main benefit of Chapter 13 bankruptcy is that you keep your property, such as your house, car, jewelry, boat and other items. Filing for bankruptcy initiates an automatic stay. This stops creditor harassment and wage garnishment and will discharge your debts. A mortgage modification may also be possible.

Steps In The Chapter 7 Process

Chapter 7, also called “liquidation,” is another way to get your financial slate wiped clean. Chapter 7 offers people who do not make a significant or steady income a way to get rid of harassing phone calls and stop wage garnishment while retaining some of their necessary property. It is typically a fairly quick process, concluding in a matter of months. Here are the four basic steps to Chapter 7:

  1. You file for bankruptcy with the bankruptcy court in your area.
  2. You get a trustee appointed by the court to oversee the repayment or dismissal of your debts. The trustee’s job is to pay the creditors as much as possible.
  3. You will attend a meeting of the creditors, who may ask you questions about your situation.
  4. Your remaining qualifying debts are discharged at the end of the bankruptcy process.

You will need to stay current on your mortgage and car payments if you want to keep these after you file for Chapter 7 bankruptcy. Chapter 7 bankruptcy wipes out old utility bills, credit card bills and medical bills. In some cases, your student loans can be affected. You will have to pass the “means test” to qualify. As an experienced bankruptcy attorney, I can advise you on your rights and options. Together, we can create a plan that will work for you.

Get A Free Consultation To Address Your Debt

Interested in finding out more about how Chapter 7 or Chapter 13 bankruptcies can provide debt relief? Call 954-535-1131 to set up a free consultation. Get the answers you need and learn how bankruptcy works. I can also be reached by sending me a website inquiry email. I help people throughout South Florida resolve their debt.

My firm is a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.