Bankruptcy FAQs

If you file Chapter 7 bankruptcy, the creditor can proceed against your co-signers, according to the terms of the debt agreement. However, if you file a Chapter 13 debt adjustment, a co-signer is protected if the following conditions are met. The debt must be a consumer debt. Also, the debt may not be incurred in the ordinary course of business, and the co-signer cannot benefit from the proceeds of the debt. As long as the debtor is making the required payments under the Chapter 13 plan, the creditor cannot act to collect from the co-signer. The purpose of this provision of Chapter 13 is to allow a debtor to repay the debt without the creditor approaching the co-signer for repayment. This protection is known as the “co-debtor stay.”

In conclusion, if you file a Chapter 7 bankruptcy, your creditors have the right to immediately demand payment from your cosigners. If, on the other hand, you file a bankruptcy petition and a proposed payment plan under Chapter 13, your creditors cannot collect from your co-signers unless it becomes clear that the Chapter 13 plan will not pay the entire amount owed.

If you are unable to make your payments under Chapter 13, you may still file for Chapter 7 bankruptcy. However, your creditors would then have the right to immediately demand payment from your cosigners.

There are several strategies for dealing with creditor harassment. First, be as honest as possible. If you explain why your account is in default, you may be able to persuade the creditor to allow you more time for payment or to make other arrangements for payment. But this is not always the case. Some creditors and collection agents are reasonable; others may rely on threats and intimidation.

A second method of stopping creditor harassment is to file for bankruptcy. Though bankruptcy can have long-lasting consequences, it may be the best solution in certain cases. In addition, filing for either Chapter 7 or Chapter 13 bankruptcy will immediately stop creditor harassment. A bankruptcy can be filed before one is sued, after suit is filed, after a final judgment is entered, and even after property of a borrower has been taken by way of execution. At every point in the process, all actions relating to the collection of a debt must IMMEDIATELY STOP. Process servers and sheriffs must stop trying to serve papers. Court proceedings are cancelled, as are depositions, foreclosure sale of a home, hearings, and the like.

If a person gets behind on their house payments, the creditor may declare the loan to be in default, which can accelerate the debt and, in some cases, initiate foreclosure proceedings. When a debt is accelerated, the full balance of the account is due, in full, immediately, not just the monthly payments. This is usually preceded by the creditor’s refusal to accept monthly payments.

In the event a creditor begins foreclosure on a property located in Florida, the homeowner, all co-signers on the mortgage, and all persons claiming an interest in the property will receive a Summons and a copy of the initial pleading, called a Complaint. Often, mortgages contain reinstatement provisions, which establish a time period when the homeowner can pay up the arrears, together with the costs of the lawsuit being filed and attorneys’ fees, before the property is sold. If there is no such reinstatement provision in the mortgage, then the homeowner will have to pay off the entire debt, which is not practical. One additional option is to contact HUD for mortgage assistance. Sometimes, creditors will agree to stop foreclosure while HUD is reviewing your file.

The beginning of a bankruptcy case, if before the foreclosure sale date, will stop the foreclosure sale from taking place. Under a Chapter 13 plan, you can make regular monthly payments and be given up to sixty (60) months to catch up on the arrears while retaining possession and ownership of the property.

Chapter 13 plans, while offering five years to catch up on arrears, will require that payments be made, and the homeowner is on a very, very tight budget for that time period. Additional fees for the Bankruptcy Trustee administering the bankruptcy estate and the funds that are paid mean that if a homeowner uses Chapter 13, the costs of the regular monthly payment and the arrears payment will make it that much more difficult to stay current and catch up on the arrears.

If you have unmanageable debt and file a Chapter 7 straight bankruptcy, you will no longer be required to repay your debts. This affords you a clean slate with which to approach future obligations. Those electing to repay their debts under Chapter 13 will need to determine their anticipated future monthly income. All types of income can be considered, such as wages, commissions, child support, spousal support, social security, workers’ compensation, unemployment, disability benefits, retirement, and dividends, so long as they constitute regular income.

After determining income, an amount should be set aside to provide for normal living expenses. After this deduction, the remaining amount of income is the maximum amount available for debt payments. If you cannot repay your debts in full over three to five years, you may be eligible for a partial repayment plan, or a “best efforts” plan. According to the “best efforts” plan, the idea is to repay as much as you can afford. At the end of the plan, any unpaid plan debts will be discharged. The goal of Chapter 13 is always to reduce your payments to a manageable amount.

How your credit will be affected by filing either a Chapter 7 bankruptcy or a Chapter 13 debt reorganization petition depends on a number of individual factors. One is your credit status today. If your credit is perfect, bankruptcy will have a negative affect on your credit. If your credit is substantially impaired, now or in the near future, filing bankruptcy may be one of the best things you can do to improve your credit. There are two main reasons for this:

1. After filing bankruptcy, you are debt-free, making your ability to repay any new credit better after bankruptcy than before, simply because you have no other debts to pay after declaring bankruptcy.
2. There is no limit to the number of times you can file a Chapter 13, so long as pre-established percentages of debt have been repaid. However, you are limited as to when you can file a Chapter 7 bankruptcy after having already received a discharge of debt.

The filing of either a Chapter 7 straight bankruptcy or Chapter 13 debt adjustment immediately stops any lawsuits from being filed or judgments being taken against you.

• If a lawsuit is pending at the time of such filing, it can go no further.
• If a judgment has been taken, its enforcement can go no further.
• If a creditor has a judgment and is garnishing your wages, the garnishment can be stopped.

Filing for Chapter 7 straight bankruptcy may relieve you of the obligation to pay the judgment. In a Chapter 13 debt adjustment, you may be able to satisfy the judgment over a period not to exceed five years without paying the judgment off. If the judgment has created a cloud upon title to your home, even though in Florida a judgment lien cannot attach to your homestead, to the extent that a cloud upon title exists, the issue can be resolved by obtaining an Order from the Bankruptcy judge. If lawsuits or judgments are a threat or reality, the protection afforded under the bankruptcy laws may be an appropriate solution for you.

Repossession is the power of the creditor to take back goods because of the buyer’s failure to meet the loan payments.

There are two types of loans: secured and unsecured. A secured loan is one that requires you to pledge something as collateral. For example, if you purchase a car, the creditor will usually require you to put up the car as collateral. On the other hand, an unsecured loan does not require collateral. Using a credit card is usually an unsecured loan.

If you default on an unsecured loan, the creditor’s only recourse, after the letters and the collection agency efforts fail, is to sue. But if you default on a secured loan, the creditor can repossess the collateral and sell it. If the money from the sale isn’t enough to pay off the loan, the creditor can sue you for the balance of the loan.

If you fall behind in your loan, you should contact your creditors as quickly as possible and attempt to work out a voluntary repayment plan.

Bankruptcy may be able to cancel the debt, or it may give the opportunity to stop the repossession. However, bankruptcy should be used in only the most serious circumstances since it can affect your credit for up to ten years. If your property has already been repossessed, some states give you the opportunity to have your property returned by paying all outstanding loan charges, fees, and costs.