Bankruptcy

By Othman Gordon

Understanding the Different Types of Bankruptcies

Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy

Last month we discussed when bankruptcy is the best option. In this economy, growing numbers of people are faced with foreclosures, collections, garnishments, medical bills, and repossessions of cars.

This month, we will discuss different types of bankruptcies. The differences between Chapter 7 and Chapter 13 bankruptcy begins with the Means Test. In order to file under Chapter 7, your family income cannot exceed the Florida median income for families of a similar size. If you qualify for Chapter 7, you can discharge unpaid credit cards, medical bills, certain kinds of loans, mortgages if you cannot afford your mortgage or your home is worth far less than you owe, and other forms of unsecured debt. If your income is too high, you can file for bankruptcy under Chapter 13. Under Chapter 13, your debt will be restructured in order to allow you to pay off a percentage of what you owe over a 3 or 5 year period. In both instances, once the court approves your bankruptcy plan, there is very little creditors can do to force you to pay late fees, fines, or harass you as long as you stay current in your payments to the trustee.

Home Foreclosure - Chapter 7 Bankruptcy
While filing for Chapter 7 will temporarily halt foreclosure actions, banks can still file for stay of relief, enabling them to foreclose on your home if it is clear that you will not be able to bring your past-due mortgage current and continue your other payments. Once your credit card and unsecured debt is discharged, you may have enough monthly disposal income to make your mortgage payment. If you had fallen behind in you payments, most lenders would probably require you to bring the mortgage current; if you can't do this, they will probably file a foreclosure as soon as your bankruptcy is closed.

Home Foreclosure - Chapter 13 Bankruptcy
Under Chapter 13, past-due mortgage payments can be rolled into your repayment plan. However, Chapter 13 repayment plans do not allow you to reduce your monthly mortgage payment. If you want to reduce your monthly mortgage payment you'll need to negotiate a loan modification with your bank. Even so, past-due mortgage payments can be included in your repayment plan so long as you are able to continue making your monthly mortgage payment. Chapter 13 also allows you to discharge a percentage of your unsecured debt (credit card), and that reduction of your total debt load may allow you regain you stability with your mortgage payment.

The above article is general in nature and should not be relied upon for specific legal advice. Every legal situation is different.
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Gordon T. Nicol, Attorney at Law

7545 Centurion Parkway, Suite 108
Jacksonville, FL 32256
E-mail : helpdesk@yourjacksonvillelawyer.com
Ph : 904-384-4911
www.yourjacksonvillelawyer.com

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