Living with great financial need can be overwhelming. First, you have to make a decision whether to file bankruptcy, then whether to file Chapter 7 or Chapter 13. If you are considering these options, it is a good idea to go over the possibilities and compare what the resulting outcomes would be. Start with making a sample bankruptcy plan.
To create your sample bankruptcy plan, set up a piece of paper with three columns. Mark one for present circumstances, one for Chapter 7 Bankruptcy, and one for Chapter 13 Bankruptcy. Start with the first column. Make a list of all your debts. First, add up all your credit card debt, medical debts, and other unsecured debts.
Now, add up your monthly payments to get a grand total of all your payments on these debts. Write the range of interest rates you pay on all these debts, just as a point of reference. In the Chapter 7 Bankruptcy column, make a big X, because a Chapter 7 discharge would eliminate all these debts. In the Chapter 13 column, write: low monthly payment, or eliminate debt, reduce interest rate.
Next, make an entry for the status of your car. Write down the monthly car payment, interest rate, and any actions that are pending. In the Chapter 7 column write: become current and make payments, or give up car. In the Chapter 13 column write: reduce payments, reduce interest, collections stop. Use the same types of entries for your house loan, except substitute foreclosure stopped.
Write down each of your categories of debt. Include any personal loans, student loans and back taxes. Personal debt is eliminated with Chapter 7 and reduced with Chapter 13. Student loans must still be paid even if you are filing Chapter 7 liquidation Bankruptcy, but in Chapter 13, you may get a reduction in interest. In some cases, Chapter 7 Bankruptcy may be able to help you eliminate tax debt. In Chapter 13, the payments may be reduced and interest will be dropped.
Now that you have created a preliminary sample bankruptcy plan, you can begin to understand your options. When you come into Weik Law Office for your free consultation, you will discuss the details of your situation with your attorney for more specific information on how to protect your assets, discharge the most debt, and have the best possible outcome in your particular case. Call Weik Law Office serving the Raleigh, Cary, Chapel Hill, Durham, and Wake Forest areas of North Carolina.
The following is a sample plan to illustrate how a Chapter 7 and Chapter 13 may help you. The examples are not intended to be specific legal advice and details may change pursuant to your individual case.
|Before consulting with Weik Law Office||After Filing Chapter 7||After Filing Chapter 13|
|• Credit cards and hospital bills of $10,000• Interest rate is 28%• Penalties are accruing each month• Payment is $416/month||Eliminated||• Reduced to $5/month• No interest• No penalties|
|• Car payment of $460/month• Interest rate is 18%• Bank threatening to take car||Must become current to keep car or surrender car and wipe out debt||Reduced to $312 /month with only 5.25% interest*Stops repossession|
|• Child support arrearage of $6,400• Court demanding $310/month||Non-dischargeable||Arrears reduced to $106/month|
|• House arrearage of $3,206• Bank beginning to foreclose• Demanding entire average amount at once||Must become current to keep house or surrender house and wipe out debt||Average arrears Reduced to $89/month*Stops foreclosure|
|• Taxes owed to IRS of $2,810• IRS demanding $160/month• Interest rate is 6%||May be eliminated if over certain period and filed on time||Reduced to $47/month with 0% interest|
|• Student loan of $6,000• Interest rate is 9%• Agency demanding $209/month||Non-dischargeable||Reduced to $100/month with 0% interest|
|• Personal loan owed to bank• Monthly payment is $120/month• Bank threatening to garnish paycheck||• Eliminated• Garnishment stopped||• Reduced to $12/month• No interest• No penalties• Garnishment stopped|
|• Monthly payment before filing: $1,675• Repossession pending• Foreclosure pending• Creditors calling every day• Garnishment threatened||Depends on items kept||• $678/month• Payment reduced by 60%• No repossession• No foreclosure• No creditor contact• Garnishment stopped|