You should be aware that certain types of debt, such as alimony or child support payments, can’t be removed through bankruptcy. A knowledgeable Crenshaw bankruptcy attorney can tell you more about what bankruptcy can and cannot do to help you in your particular situation.

Chapter 7 bankruptcy is best at eliminating “unsecured” debt. Unsecured debts are such debts as most credit card bills and hospital bills. Substantial unsecured debt can lead to creditor harassment, including telephone calls at night and on weekends, which can add significant stress to the life of a person dealing with a mortgage, car payments, and the business of ordinary living. Once you file for bankruptcy, all creditor harassment and all attempts to collect your debts, including lawsuits, come to a complete stop (called a “stay”).

Bankruptcy is less effective at handling “secured” debt. Secured debt is debt secured by property such as a car or a house. If you fail to pay secured debt, the property that secures it may be repossessed.

Is Chapter 13 Bankruptcy More Effective for You?

For secured debt, Chapter 13 bankruptcy may offer more effective tools to discharge your debts and allow you to keep your property. If sale of a property has not already occurred, you may be able to take certain items back once you file your Chapter 13 bankruptcy debt repayment plan.

For example, if you file Chapter 13 bankruptcy, you may be able to stop a foreclosure (assuming the house has not already been sold) and require the lender to accept a debt repayment plan that has been approved by a bankruptcy trustee and the court. In order to do this, you must be employed or have sufficient income to make your monthly payments.

Chapter 13 bankruptcy also has a tool called a “cram down.” This tool can be used when your debt is higher than the value of the property that secures it. An example of property on which cram downs can be effectively used are cars. Once a car is purchased, its value drops. If you owe a significant sum on a car loan from more than 30 months before you file bankruptcy, and the car has fallen far in value, you can use a cram down. You ask to pay the creditor the fair replacement value of the car through your payment plan and discharge the remainder of the debt.

There are many tools available to help you deal with the majority of your debt. While you generally cannot eliminate alimony, child support, or student loan debt, both Chapter 7 and Chapter 13 bankruptcy can help you take care of medical bills, credit cards, car payments, mortgage payments, and most other forms of debt.

To determine which chapter is right for you, a host of factors must be considered. Contact the experienced Crenshaw bankruptcy lawyer Devin Sawdayi at 310-475-9399 or via our online form for help with this process.