Why filing for
bankruptcy may help you: |
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Bankruptcy can be a way to get rid
of most of your debts. If you successfully complete
your bankruptcy, your most of your debts will be
discharged -- you don't have to pay them any more.
Once you file for bankruptcy, you are protected by
the bankruptcy court through the automatic stay. For
example, creditors cannot keep hassling you about
your bills, they cannot seize your property, and
they cannot garnish your wages while you are in
bankruptcy.
Through a Chapter 13 bankruptcy, you may be able
to save your home or your car if you are behind on
your payments. In order to do this, you must be able
to resume making your regular payments and pay a
little extra each month to the bankruptcy Trustee.
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Why filing for
bankruptcy may not help you: |
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Bankruptcy will NOT discharge child
support, alimony obligations, most tax debts or
student loans. This means that even if you complete
your bankruptcy, you will still have pay back these
types of debt.
Bankruptcy may not be able to
protect your secured property, such as your car or
your home. This is because bankruptcy may get rid of
your personal obligation to pay your loan, but it
doesn't get rid of the secured creditor's right to take the
property back if you don't make your payments.
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What's a Chapter 7? |
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A Chapter 7 bankruptcy is a
"liquidation" bankruptcy. This means that the
bankruptcy Trustee takes your "non-exempt" property
and liquidates it (or sells it) to pay your
creditors. The property that you are allowed to
protect from the Trustee is called your "exempt"
property (see below for more information about
exempt property).
If all your property is exempt then
there is nothing for the Trustee to liquidate. Your
debts are discharged once you complete your Chapter
7. You don't have to make any payments to the
Trustee in a Chapter 7 bankruptcy. You usually get
your discharge within 4 to 5 months if you don't
have any property for the Trustee to liquidate.
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What's a Chapter 13? |
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In a Chapter 13 bankruptcy, you make
regular payments to the bankruptcy Trustee, who uses
this money to pay off at least some of your debt.
One of the main advantages of a Chapter 13 is that
it gives you a chance to save your house if you are
in foreclosure.
To successfully save your house,
you must be able to make your regular mortgage
payments and to make your payments to the Trustee
every month. A Chapter 13 will not save your house
if you simply can't afford your mortgage payments!
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What is exempt
property? |
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Bankruptcy is designed to give
someone who is seriously in debt a fresh start by
getting rid of that debt.
A fresh start does not mean that the debtor has
to start over without anything. Some of your
property is protected from liquidation by the
Trustee (who acts on behalf of your creditors) so
that once you've completed the bankruptcy, you have
something to start over with. This means that the
Trustee cannot liquidate (or sell) your exempt
property to pay back your creditors.
For most people, the biggest exemption is for
their home. The amount of the exemption varies by
state. In Oregon, as of 2010, a single debtor can
protect up to $40,000 of equity in real property. |
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