Since 1991, David Siegel has been helping people get out of debt in Chicago and in the suburbs. Over 75% of prior bankruptcy clients filed a chapter 7 bankruptcy. Chapter 7 bankruptcy is also known as fresh start bankruptcy. It allows someone who has unsecured debts to gain a fresh start within a matter of months. Unsecured debts such as credit cards, medical bills, past-due utilities, auto repossession deficiencies, foreclosure deficiencies and most other debt can be eliminated in a chapter 7 bankruptcy filing. There are some debts that are not limited in a chapter 7 bankruptcy filing. Those debts include student loans, recent taxes, parking tickets, child support and maintenance payments as well as some other debts incurred by fraud. For most individuals or couples, the majority of their debt is eliminated in a chapter 7 bankruptcy filing.
For the other 25% or so of people who have filed for bankruptcy, they have filed under chapter 13 of the US bankruptcy code. Chapter 13 is a reorganization whereby an individual or couple agrees to repay debt over a three to five-year period of time. The most common use of a chapter 13 bankruptcy filing is to save a home that is in foreclosure. As long as the case is filed before there is a sheriff sale or auction of the property, then the homeowners can repay the mortgage arrearage over a three to five-year period. The homeowner also has to pay the current outstanding mortgage payment on a month-to-month basis going forward. Provided the homeowner can make the arrearage payment to the chapter 13 trustee and make mortgage payments going forward, then a chapter 13 will be successful. At the end of the three to five-year period, the homeowner will effectively reinstate the mortgage and will be called current. As far as other debts treated in a chapter 13, unsecured creditors such as credit cards and medical bills can often be paid back less than 100%. Most chapter 13 bankruptcy cases fall somewhere between 10% and 50% in terms of repayment.
If you have a vehicle, that vehicle will be paid back through the chapter 13 trustee as well. What this means is that you will no longer be making your car payment directly. The amount that you pay the chapter 13 trustee each month will include your car payment, your mortgage arrearages, and all of your other miscellaneous debt.
As you can see, there is a vast difference between chapter 7 and chapter 13. One of the things that we do at this office, is we interview you extensively to ensure that we are putting you in the correct chapter for your needs. If you are someone who does not have significant assets and has a lot of unsecured debt, then we’re going to do everything we can to get you into a chapter 7 fresh start that you can get back on your feet. If on the other hand, you are someone who is trying to save a home from foreclosure or otherwise repay secured debt or unsecured debt over time, we’re going to make sure that you have the ability financially to engage in a chapter 13 payment plan.
Having an experienced bankruptcy attorney on your side is critical. Make sure you interview several attorneys and get a feel for what they’re like, what their capabilities are and what their practice type is. If you do not get answers to your questions, then you should move on to attorney who can help you. The attorney that you choose is going to be critical in the success of your case.
