FAQs Bankruptcy (Part 1)

Negotiating the best path through the bankruptcy process raises some common questions from people contemplating a bankruptcy court filing. The following are some of the issues which generate the most bankruptcy questions:

What are the differences between going with a debt negotiation services provider and filing a Chapter 7 bankruptcy?
The biggest difference is that the end result provided by debt negotiation services is the establishment of a payment plan which serves to pay off balances of debt on credit cards, medical expenses, and other unsecured debts. These balances are reduced via negotiations between the service provider and the creditors listed in the settlement. The end result of a Chapter 7 filing is that these same types of balances are discharged by the court in total, meaning that the debtor has no further obligation to make payments on the balances.

How do I file bankruptcy?
This first depends on whether the filing will be for a Chapter 7 or a Chapter 13 bankruptcy. Prior to filing a Chapter 7 bankruptcy, the filer must take a means test which takes income, expenses, assets, and liabilities into account. As a rule of thumb, if the filer’s income is below that of the state’s median income, a Chapter 7 bankruptcy will be permitted. For either a Chapter 7 or a Chapter 13 bankruptcy, filers can go directly to the court but it is highly recommended to have an experienced attorney do the bankruptcy court filing.

Can I avoid repossession of my automobiles with a bankruptcy court filing?
A bankruptcy court filing stops all collection efforts including vehicle repossessions. A Chapter 7 stops the process during time the bankruptcy filing is active but balances must be brought current shortly after the bankruptcy process is completed. A Chapter 13 bankruptcy can actually avoid repossession with the use of an “auto cram down”. An auto cram down can reduce monthly payments, reduce the amount due, and allow for payments to be caught up over time through a court approved payment plan.

We’ll tackle additional bankruptcy questions in our next blog post.