Bankruptcy is a way to get relief from your debts, either by discharging (stopping collection of) most or all of your debts, or by paying a portion of what you owe over time. The bankruptcy court has the power to stop wage deductions, bank garnishments, and mortgage foreclosures so that you have a chance to work on your financial problems without creditors harassing you. The two most common forms of personal bankruptcy are Chapter 7 and Chapter 13.
In Chapter 7 bankruptcy, the goal is to discharge most or all debts without paying creditors anything. However, a Chapter 7 does not force a mortgage holder or auto lender to give you additional time to catch up on payments. In addition, some kinds of debts, like child support, alimony, student loans, and some taxes, are not discharged in Chapter 7.
In Chapter 13 bankruptcy, you have an opportunity to pay back some of your debts over time. It is most often used to give you time to bring past-due payments, on a mortgage or car loan, current, or if you have property that you want to keep and don’t want to have sold by a Chapter 7 trustee. In Chapter 13, you remain in control of all your property. Under a plan that is approved by the bankruptcy court, you make weekly or monthly payments to the Chapter 13 Trustee, who then makes payments to your creditors. The payment period is typically around three years but can be as long as five years. In this way you protect the equity in your home or car while paying off a portion of debts. The requirements for a Chapter 13 plan are very technical and can be confusing, even to an attorney who does not practice extensively in bankruptcy court.
David P. Lloyd has represented clients in Chapter 7 and Chapter 13 cases for decades and can help you choose the appropriate form of bankruptcy for your unique financial situation. The Law Offices of David P. Lloyd are a debt relief agency. Mr. Lloyd helps people file for bankruptcy relief under the Bankruptcy Code.