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Did you know that if your house is worth less than your first mortgage that the second mortgage can be stripped of and paid off for even pennies on the dollar in a Chapter 13 bankruptcy? Many people qualify for this treatment and so making payments in a Chapter 13 is actually preferable to a Chapter 7 (with no payments) because the overall debt relief in a Chapter 13 is much higher. It only makes sense if you intend to stay in your home for a long time. Other unique situations like owing taxes can make a Chapter 13 preferable.

Chapter 7 is the easiest and most common bankruptcy filling in the United States. Established under Title 11 – Bankruptcy Court, Chapter 7 allows debtors to discharge all their debts in exchange for a fresh start. Debtor's assets are collected and liquidated to satisfy outstanding debts. Both federal and state laws provide exemptions to protect the lifestyle of debtor.

Usually, most Chapter 7 cases take anywhere from 3 months to 6 months before the debt is discharged. Depending on the district of filing, certain debts will not be discharged, such as student loans and back owed taxes. Securities securing secured debts, such as real property in mortgage loans, will revert back to the original creditor. Unsecured debt, such as credit card purchases and medical bills, will be dropped unless creditors can demonstrate a pattern of maliciously raking up bills with no intent of ever paying them. Previous judgments and child support payments can be discharged through Chapter 7 bankruptcy. All discharged debts become invalid releasing debtor from liability of repayment. Creditors of discharged debts can't pursue debtors for payment or collection. On a rare occasion, the court may grant an appeal to discharged credit holders. Chapter 7 clients will need to attend and be present at a number of court hearings including interview sessions conducted by their creditors.

If you are considering protection of a Chapter 7 bankruptcy procedure, you will need the following: • Copies of the last two years Federal tax returns • Copies of all your debts
 • Copies of your paycheck stubs
 • Certificate of Credit Counseling
 • Copies of all financial records (such as checking accounts)
 • Detailed list of monthly expenses
 • List of assets (The court has the authority to ask for more documents)

The primary effect of any bankruptcy filing will be reflected on the debtor's credit ratings. For the first three years after your case had been discharged, you will not be able to attain any new credit lines. Some creditors may grant you the right to maintain credit lines providing that you agree to continue holding liability for repayment. You can apply for secured credit lines to reinstate your credit rating. Federal laws prohibit your employer from terminating your employment because you had filed bankruptcy. You will enjoy more cash flow, as you will not be liable for monthly payments on discharged credit lines. After the lapse of the first three years, most bankruptcy clients – who maintained good credit practices – notice that their credit ratings are back to normal levels. Some jobs, in the financial sector, can deny you employment based on your credit history. Such jobs act in authority given to them through federal laws to protect their overall product reputation.

A Chapter 13 bankruptcy is a debt repayment plan allowing debtors to reconstruct their lifestyle to accommodate a drastic change. Unlike Chapter 7, Chapter 13 requires debtor to repay back a portion of their debt in the form of monthly payments. A trustee is assigned the case to act in favor of the creditors with rights to enforce judgment of debtors who fail in their obligations.

The court expects you to change your lifestyle. With trustee monitoring your financial decisions, your case can be reopened to enlarge the payment, or dismiss it, opening the way for creditors to pursue you in a court of law with each creditor filing a separate lawsuit. This will translate into larger legal fees. Chapter 13 bankruptcy lasts anywhere from 3 to 5 years depending on the repayment plan. Certain debts will be dismissed while other debts will become part of the payment plan. The payment plan itself varies depending on the current income level maintained by the debtor. Thus, if the debtor's income increases, the payment amount will increase accordingly. Chapter 13 allows debtors to leave certain credit lines open. It also allows debtors to maintain title for secured debts, such as real estate. For distressed homeowners, Chapter 13 filing may save their homes by forcing lenders to accept reduced payments for a certain period of time.
Debtors who use the service of an attorney at law become a client until their case is discharged by the bankruptcy court. If a debtor changes the address, debtor must notify trustee, attorney, and the court. In a Chapter 13 bankruptcy, debtor carries much of the responsibilities associated with their case.

If you are considering protection of a Chapter 7 bankruptcy procedure, you will need the following: • Copies of the last two years • Federal tax returns
 • Copies of all your debts
 • Copies of your paycheck stubs
 • Certificate of Credit Counseling
 • Copies of all financial records (such as checking accounts)
 • Detailed list of monthly expenses
 • List of assets (The court has the authority to ask for more documents)

Chapter 13 is a debt restructure plan with repayment of certain debts. It is designed to create breathing room for debtors in order to change their lifestyles to repay their debts. As a debtor under Chapter 13 protection, you will need to maintain contact with your attorney and trustee on file. Your credit history will be affected resulting in dismissed or downgraded credit limits. You will not lose your personal property as long as you make your payments. After your case is discharged, your credit history might return to normal, with certain limitations. Your employer can't fire you as such action in prohibited by federal law. Creditors, named in your bankruptcy case, will cease to contact you except via trustee.

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