Should I file bankruptcy now or wait?

Life can throw many curveballs, some of which we can hit and some which we cannot. If life has thrown you a curveball such as job loss, a medical issue, or divorce, it can be extremely difficult to remain current on your financial obligations. If your paycheck is not sufficient to cover your regular living expenses combined with the minimum payments that are due on credit cards and/or other debts, then bankruptcy may be an option to consider. If your paycheck is not enough to get through each month without having to use your credit cards or borrow money from other sources, you are falling backwards financially instead of moving forward. Bankruptcy allows an individual a Fresh Start in their financial life.

I have heard that there are different types of bankruptcy – how do I know which one is right for me?

What Are the Differences Between Chapter 7 and Chapter 13 Bankruptcy?

When most people hear the word bankruptcy, they are thinking about a chapter 7 bankruptcy. In chapter 7 a person is seeking to discharge (wipe out) as much of their debt as possible. Most medical, credit card and other unsecured debts can be discharged in a chapter 7 bankruptcy.

The other type of bankruptcy available to most people is a chapter 13 bankruptcy. Under this type of bankruptcy, you propose a plan to pay back at least a portion of your debt over a three to five year period. How much you need to pay back, and over what duration, depends on several factors including what types of debt you have, what assets you own and how much income you earn. Each of these factors will play a role in determining whether you have the option to choose which chapter of bankruptcy to file or if you will only have one option. Additionally, if a chapter 13 bankruptcy is the best path forward, these factors will help determine what the monthly plan payment will be, what creditors will receive payment and the likely duration of the plan that will be needed.

An experienced bankruptcy attorney will be able to ask you the questions that will guide you to the correct answer on whether a bankruptcy is a good choice for you, and, if so, which chapter to file under.

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How long does the chapter 7 bankruptcy process take?

Generally from filing to discharge, a chapter 7 bankruptcy will remain open for about 4 months.

What does Chapter 7 bankruptcy discharge mean?

Discharge means that you have completed the bankruptcy process and your debts have been discharged (or eliminated).

How soon can you file bankruptcy after discharge?

You cannot file a chapter 7 bankruptcy within 8 years of the filing of an earlier chapter 7 bankruptcy. Filing another bankruptcy after the discharge of an earlier bankruptcy has several time limits that depend on whether you are looking to file chapter 7 or 13, which type of bankruptcy you previously filed and, if chapter 13, how much debt was paid back. This is something your attorney can assist you with during an initial consultation.

Advantages and disadvantages of chapter 7 bankruptcy?

Chapter 7 will give you a Fresh Start to your financial life in a short amount of time. When you file chapter 7, creditors will not be able to contact you or charge you any additional fees. Upon discharge, those creditors will never be able to seek repayment from you.
The main disadvantage of chapter 7 is that it will be reported on your credit report for 10 years. This does not mean that future creditors will not be able to offer you credit for 10 years. It means that future creditors will take the prior bankruptcy into consideration when determining whether to offer a loan and on what terms.

How does chapter 7 bankruptcy affect your credit?

It will appear on your credit report for 10 years. For people who have been able to keep current on their minimum credit card payments, it will mean an initial drop in their credit score. Many of my clients are barely making their minimum payments, or have had to stop already. At this point, your credit score is starting to drop and will continue to drop unless you can get current on the payments quickly. As such, a bankruptcy filing, in the mid to long term, is actually better for most people’s credit than continuing to try to make the minimum monthly payments.

Q&A with Our Chapter 13 Bankruptcy Attorney in Vancouver, WA!

Is chapter 13 bankruptcy a good idea?

Some clients choose to file a chapter 13 if they have debts that cannot be discharged in chapter 7 and need to be paid, but the client requires a longer period of time to pay them. These debts include child support/alimony arrears, mortgage arrears, and taxes amongst others.

What is the success rate of chapter 13 bankruptcy?

Since a chapter 13 bankruptcy takes three to five years to complete, the success rate is much lower than a chapter 7 bankruptcy. However, the filing of a chapter 13 bankruptcy provides the same immediate “automatic stay” benefits that prevent creditors from contacting you or seeking payment during the bankruptcy. Even though a chapter 13 bankruptcy is more difficult and takes much longer to complete than a chapter 7 bankruptcy, it is still a good option for many people to consider when discussing their options with their bankruptcy attorney.

What are the advantages and disadvantages of chapter 13 bankruptcy?

Chapter 13 bankruptcy provides many similar benefits as a chapter 7, including the “automatic stay” that prevents creditors from contacting you or seeking payment as soon as the bankruptcy is filed. Chapter 13 bankruptcy allows you time to pay back debts that would not be discharged in a chapter 7 bankruptcy. Additionally, there are certain debts that are dischargeable in chapter 13 that are not dischargeable in chapter 7.

How do you get out of chapter 13 bankruptcy early?

It depends on the individual chapter 13 plan. In some instances, the only way to complete a chapter 13 bankruptcy early is to pay all of the creditors 100% of their filed claims. In other cases, you may petition the Court to allow you to end the case early. It is something that you would need to discuss with your bankruptcy attorney as the facts of each case differ.

How do you remove a chapter 13 bankruptcy from your credit history?

Regardless of what late-night TV commercials and online pop-up ads may say, you cannot remove any bankruptcy from your credit report. Both chapter 13 and chapter 7 bankruptcy filings remain on a credit report for 10 years.

Should I Hire a Bankruptcy Lawyer in Vancouver, Washington?

Whether or not to file a bankruptcy, and which bankruptcy to file, are difficult decisions. The guidance of an attorney with years of experience in the Federal Bankruptcy Court will make this seemingly daunting process a manageable one. An attorney will let you know what information and documents you will need to gather and assist you in preparing the formal bankruptcy petition. In addition to answering your questions, the attorney will be able to apply your personal situation to the required Means Test which will determine which bankruptcy you may qualify for. An attorney will act as your guide through the bankruptcy process and make sure that not only is a proper bankruptcy petition filed with the Court to start the process, but also assist you in preparation for the Trustee Meeting that is required with every bankruptcy filing.

Although a person may file a bankruptcy petition without hiring an attorney, you will be held to the same standard as an attorney throughout the process. The Federal Bankruptcy Court issues such a warning with the following language on every bankruptcy petition that is filed:

“Because bankruptcy can have serious long-term financial and legal consequences, including loss of your property, you should hire an attorney and carefully consider all of your options before you file. Only an attorney can give you legal advice about what can happen as a result of filing for bankruptcy and what your options are. If you do file for bankruptcy, an attorney can help you fill out the forms properly and protect you, your family, your home, and your possessions. Although the law allows you to represent yourself in bankruptcy court, you should understand that many people find it difficult to represent themselves successfully. The rules are technical, and a mistake or inaction may harm you. If you file without an attorney, you are still responsible for knowing and following all of the legal requirements. You should not file for bankruptcy if you are not eligible to file or if you do not intend to file the necessary documents. Bankruptcy fraud is a serious crime; you could be fined and imprisoned if you commit fraud in your bankruptcy case. Making a false statement, concealing property, or obtaining money or property by fraud in connection with a bankruptcy case can result in fines up to $250,000, imprisonment for up to 20 years, or both. 18 U.S.C. §§ 152, 1341, 1519, and 3571.”

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Mark Carter has 28 years of experience in the Federal Bankruptcy Court.  Mr. Carter has assisted thousands of clients in both chapter 7 and chapter 13 bankruptcy cases.  A no-cost consultation is available to any potential client who wishes to learn more about their options and to see if a bankruptcy would be a choice that is open to them.  If you would like to learn more, please contact Navigate Law Group and ask to schedule a no-cost consultation with Mark Carter.

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Mark A. Carter

Mark A. Carter

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Dainen N. Penta

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Every legal issue is very unique. Accordingly, the information in this blog is intended as general education material and not as legal advice. If you think you may have a legal issue, you should consult an attorney.