Bankruptcy is a legal process to help the honest debtor get a fresh start in life.
There are generally two "chapters" of the Bankruptcy Code that are available to the
common folk -- Chapter 7 and Chapter 13.
In very simplified terms, Chapter 7 bankruptcy is a liquidation proceeding that lasts
approximately four months. The debtor may keep his "exempt" property, most retirement
pension plans, and his future income. The Trustee may liquidate all of a debtor's "non-exempt"
assets to cash in order to pay off claims by unsecured creditors. Generally, the type of person
who files for Chapter 7 bankruptcy is someone who is trying to wipe out a lot of unsecured debts
and who has little, if any, non-exempt assets.
Chapter 13 bankruptcy, on the other hand, is a reorganization proceeding that lasts approximately
3 to 5 years. The debtor must submit a "Plan" on how he proposes to pay off his creditors during
this time period. One of the most common reasons why a Chapter 13 bankruptcy is preferable over
a Chapter 7 bankruptcy is to save a home during default or to stop a foreclosure proceeding.
Under a Chapter 13, the debtor would have 3 to 5 years to pay back the deficiency amount while
maintaining the regular mortgage payment.
Many of us wonder what life would be like after a bankruptcy filing. We wonder whether we
will ever be able to have credit again. Although a bankruptcy filing stays on a credit report
for 10 years, most people do not realize that a derogatory mark on your credit report
(such as over 30 days late on a payment, a "charge off", a repossession or foreclosure)
stays on a credit report 7 years from the date it was last reported. Accordingly, if a
creditor continues to report (or update) the derogatory mark prior to the expiration of
every 7-year period, then conceivably, such derogatory mark will remain on the credit report
much longer than the 10-year bankruptcy report. Call and let us help you. 800-231-4810 or 419-222-9933
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