The Law Office of Anna Sarrazin represents clients seeking to file a Chapter 7 or Chapter 13 bankruptcy proceeding. The choice to file a Chapter 7 or Chapter 13 would depend mainly on the type of debt your have. The Bankruptcy Court classifies debts in three main categories; they secured; unsecured and priority debts.
Secured Debts:
Let's start with secured debts - also called secured creditors. A prime example of a secured creditor would be a mortgage company. When you purchase a house you generally pay a down payment and then borrow from a bank or similar institution to pay off the balance of that loan to the seller of the property. The bank becomes the mortgage holder on that house, to whom you promise to make monthly payments over a number of years to pay back the loan. The mortgage company is considered a secured creditor, which means that the debt you owe to them is secured by the house that you bought. Hence, the contract that you signed with the mortgage holder states, in pertinent part, that if you fail to make the payments as promised the mortgage company can repossess or take back the house. Thus, the bank that loaned you the money to pay off the seller is the actual owner of the property - that is, until you pay back the loan in full. Although the deed to the property is in your name; the lender holds what is called a deed of trust against you, which obligates you to make the promised monthly or quarterly or yearly payments to the trustee named in the deed of trust; otherwise the trustee on that deed of trust can elect to retake the property via a foreclosure sale or any other desired method of repossession.
A second type of secured creditor which you are familiar with is the lien holder on your automobile. If you purchase the automobile with a down payment and a loan from either a bank or the automobile dealer for the balance owed on the car, you sign a security purchase agreement with the seller of the automobile. Hence, the seller holds a lien against your car similar to the the mortgagee's deed of trust explained above. The lien holder like the mortgage company has the right to repossess the automobile if you fail to make the payments as agreed to in the security purchase agreement that you signed. What usually happens is that if you miss a certain amount of monthly payments and fail to make arrangements to get caught up on those payments, the lien holder or bank that sold you the car will repossess your car and then sell it at an auction sale, generally for less that what you owoe on that vehicle. After the sale, you will like receive what is called a deficiency balance collection letter from the dealer or bank saying that you still owe them for what they were unable to get in the auction sell. Luckily this deficiency balance is dischargable in a Chapter 7 bankrupcy proceeding, because now this deficiency balance is no longer secured by the car which has not been sold.
Unsecured Debt:
One of the most common types of unsecured debts is credit card debt. Contrary to popular understanding, in most cases credidt card debts are still dischargeable in bankruptcy without a repayment plan (in a Chapter 7 bankruptcy case). In many cases, tax debts can also be discharged. Contrary to popular understanding, the change that took place in the bankruptcy laws in 2005 did not eliminate the ability to get rid of unsecured credit card debt and certain taxes in a Chapter 7 case (as opposed to a Chapter 13 repayment plan).
While it clearly was the intent of Congress to appease the credit card lobby and makt it more difficult to elimiate caredit card debt, the new bankruptcy laws which went into effect in 2005 made filing bankruptcy more complecated, but certainly did not eliminate the ability to do so. Credit card debts are just as discharageable as they were for at least 30 years prior to the recent law change. As long as the debt was not incurred through fraud or other special exceptions to discharge, you can still file a Chapter 7 case and elimiate all of your credit card debt.
Income taxes may also be discharged under certain circumstances. The basic rule is that if the taxes are older than 3 years from the date the return was last due to be filed, and the return was filed more than 2 years ago, and not assessed in the last 270 days prior to filinlg, then they may be dischargeable.
Another familiar debt that is considered unsecured is your medical bills, for both medical treatment and services such as hospital stays, ambulance bills and medications.
When to Chose a Chapter 7:
A Chapter 7 bankruptcy, also known as "fresh start" bankruptcy, provides debt relief for honest people who are being crushed by overwhelming debt. People from all walks of life - from white-collar professionals to blue-collar workers - often find themselves unable to keep up with credit card payments, medical bills or other such debts; and especially after experiencing a job loss, illness or divorce or other such circumstances beyond the individual's control.
If this is your situation, Chapter 7 bankruptcy can be an effective method of discharging most of your debt, giving you the fresh start you need. In addition, you will be able to keep your house, your car, and retirement savings in most cases.
The focus of the Chapter 7 bankruptcy is to relieve the individual of "unsecured" debt such as credit cards, medical bills, unsecured personal loans and other such unsecured debt. By filing a Chapter 7 to relieve the individual who is struggling under more debt than available income; he or she will now have sufficient income to pay for the necessities of life. This will give the individual the "breathing room" he or she needs to re-structure their life after, for example, losing a job; going through a divorce; or recovering from an illness. This is the "fresh start" that you - as a hard-working individual who has just come upon hardtimes - can receive in a Chapter 7 bankruptcy proceeding.
When to Choose a Chapter 13
Chapter 13 is commonly referred to as an "installment" or "Restructuring" Bankruptcy. The Chapter 13 bankruptcy is designed to help you keep your home, vehicle and other secured items so you can repay them over time. What we do is set up a more reasonable arrangement through the court, called a "payment plan" for you so you can stay on top of your current monthly payments. This will help you to pay your bills easier.
Each month you make your single payment to the trustee. Under your plan, all of your creditors are given a priority and the trustee makes the payments to creditors each month. Often at the end of the payment plan, which typically last three to five years, there is not enough money for all of the crediotrs. This can sometimes lead to the court stripping off a second mortgage or leaving many of your unsecured creditors such as credit card companies out of your life, but without them receiving a dime.
You may want to consider a Chapter 13 bankruptcy if any of the following describe your situation:
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You have had a sudden job loss or unexpected medical bills that have caused you to fall behind on your bills
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You can afford your normal monthly payments but just cannot catch up on your past-due payments.
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You can afford to make some payments toward your bills but are unable to pay as much as your creditors want.
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Your home is facing foreclosure and you want to continue living there.
While a Chapter 7 bankruptcy eliminates your debts quickly through a liquidation, the Chapter 13 bankruptcy is designed to help you keep your property while gradually catching up on past-due balances. Why feel the stress of a foreclosure or repossession when a Chapter 13 bankruptcy may take this pressure off of you by allowing you to catch up on your past due payments in a more reasonable repayment plan without losing your home or car?
To learn more abut the services offered by The Law Office of Anna Sarrazin Contact Us on-line or call us at (510) 834-7443.
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This legal experience is offered to you with reasonable and affordable attorney fee arrangements. Call to arrange for a free initial consultation.
1400 Broadway, Suite 915
Oakland, California 94612-2041
(510) 834-7443
(510) 332-9496 (cell)
Email: attorney.anna.sarrazin@gmail.com
