By filing bankruptcy basically you can eliminate or wipe out your debts. There are two types of bankruptcy. There is Chapter 7, which is known as a liquidation, but no one usually loses any property. You basically list all of your assets, and the bankruptcy code provides you with a series of exemptions where you can shield your assets (cover them up) so creditors cannot come in and take things away from you. Those are pretty generous enough where generally no one loses any property. Assuming you have been able to exempt everything, then you will list all of your debts. You then put your debts behind you and get a fresh start so you can move on with your life.
Now there is a second type of bankruptcy. It’s Chapter 13. Chapter 13 is primarily for people who are about to lose something. For instance, maybe they are behind on their mortgage payments and facing a foreclosure, or they fall behind on their car payments and their car is in danger of being repossessed. So in situations like that, what you can do is file Chapter 13, and then you are allowed to makeup the back mortgage payments over a five year period. You will have a Chapter 13 plan which includes your regular mortgage payment as well as your mortgage arrears. And the good thing about it is, you don’t have to pay any interest on your mortgage arrears. Now in the Western District of Pennsylvania, they have a loan modification program where you can possibly lower your mortgage payment and put all your arrears at the back of the mortgage so then you are safe with your house and it will not be foreclosed on.
There is also a situation where you can file about your car. You can make up your back car payments over a five year period, then your car won’t be subject to being repossessed. But even in situations where your car has been repossessed, you can still possibly get your car back. So those are the primary reasons why people file Chapter 13. Now there are, of course, some other reasons. For instance, let’s say you have some back taxes you want to make up or maybe you are not eligible to file Chapter 7. But in both instances, you can get your life back together again. You can move forward. So if you are interested and you find yourself falling in either one of those situations, give me a call. We can sit down and discuss which option is best for you.