Carlsbad Bankruptcy FAQ

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 Bankruptcy

A "Chapter 7 bankruptcy" is commonly referred to as a liquidation bankruptcy or straight bankruptcy. Once a person files a "Chapter 7" an estate is created comprised of all the property that you own.

Approximately one month after filing a "Chapter 7" you will go for a meeting with the trustee (an officer of the court) who has the duty to sell any un-exempt property and pay your unsecured creditors. The trustee's job is to administer any non-exempt assets for the benefit of your creditors.

Approximately 2-3 months after your meeting with the trustee you will receive a discharge order from the court. Discharge is the goal of a "Chapter 7 bankruptcy" and this means that your unsecured creditors will be wiped away and you will no longer have to pay those creditors.

Chapter 13 Bankruptcy

In "Chapter 13 bankruptcy" your unsecured debt is not entirely eliminated but is a consolidation of your total debt. "Chapter 13" is also known as a reorganization bankruptcy.

A plan is filed with the court to consolidate your debts into a more manageable monthly payment plan. This way your debts will be paid over a set period of time, typically 3-5 years in total.

The set monthly payment will be based upon your income each month, your monthly expenses, your portion of assets that are un-exempt, and how much of your debt has been paid.

In this type of bankruptcy, you are also able to keep your property and any assets you have during the bankruptcy process. Additionally, you may only end up having to pay a portion of your debt, with the rest of the debts being discharged.

What debts are discharged during bankruptcy?

Dischargeable debts include:

• Credit Cards
• Consumer Debt
• Utility bills
• Medical Bills
• Unpaid Rent
• Repossessions
• Judgments
• Lawsuits
• Collections
• Pay Day Loans
• Personal Loans
• Some tax debts

Debts that cannot be discharged during bankruptcy include:

• Student Loans
• Child Support
• Alimony/Spousal Support
• Tax Debt
• Debt to the government
• Debt for crimes committed
• Court Fines
• Parking Tickets
• Tollway Fines Liens
• Personal injury related to the operation of a motor vehicle or other vehicle while intoxicated or under the influence of drugs

How long does it take for my bankruptcy to not show on my credit report?

After filing for bankruptcy, it could show up on your credit report for anywhere from 7 to 10 years after it has been discharged. Even though it may remain on your report for that long, this does not mean that you will not be able to get credit.

Through various credit restoration options, you can build credit over time. Allow our Carlsbad debt relief attorney to help you choose the best option for you.

After bankruptcy, how can I restore my credit?

As odd as it may sound, it is vital that you get a small bank loan or credit card in your name after you file bankruptcy. By making your monthly payments on time or even before their due date, your credit score will gradually increase.

This will help to improve your overall financial standing as well. As you continue to make car payments, mortgage payments, and purchasing any other expenses, this will all aid in restoring your credit over time.

Does credit consolidation not related to bankruptcy ever work?

90% of all bill consolidations fail. The reason that most fail is that there are no laws dictating that creditors must enter into consolidation, nor force them to stop charging interest on the money you owe them.

In essence, you will not be able to pay less than what you owe and have to pay interest on it. Your credit will also not be able to recover until your final payment has been made.

Typically this is 3-5 years after your process has begun. When you file bankruptcy, however, it forces your creditors to comply with Federal Law and can help your credit recover faster.

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Get started on your Carlsbad, CA bankruptcy case as soon as possible, contact us today.