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Certain basic concepts
apply under both Chapter 7 and Chapter 13. The case is commenced by filing a
petition with the bankruptcy court. The petition must list all of your assets,
liabilities and other information required under the code. You cannot pick and
choose which creditors to include on the petition, but that doesn't mean you
cannot keep your home or vehicle, as will be explained later. All creditors must
be listed. You may file as an individual or as husband and wife. Married couples
do not have to file together if substantially all debts are solely in one
spouse's name.
Your creditors can force you into bankruptcy. This is called an involuntary
proceeding. For the most part, involuntary proceedings are confined to business
cases. Almost all consumer cases are filed voluntarily.
The filing of the petition invokes what is known as the automatic stay. This
means that your creditors are immediately prevented from doing anything further
to compel collection of a debt. The harassing calls, garnishments, law suits,
foreclosures, repossessions or shutting off of utility services are all stopped.
The "stay" is designed to give you time to sort out your affairs free from the
harassment of creditors.
In the petition, your debts are classified as either priority, secured or
unsecured. Each is treated differently depending on which chapter is filed.
Priority debts in consumer cases are usually limited to government tax
liabilities and support obligations. Priority creditors have certain rights to
payment over other creditors.
Secured debts are backed by property known as collateral, and typically consist
of auto loans and mortgages. The creditor has a lien, or right to recover the
property upon default. In most cases, liens attach to property by virtue of a
written security agreement signed when the pledged property is purchased, or
upon obtaining a loan.
Unsecured debts are almost everything else. They include credit cards, back
utilities, medical bills, store charges and unsecured loans. Unsecured creditors
do not have a lien or interest in your property. If you purchased certain
property with a store charge or credit card, the seller cannot repossess that
property on your default without a security agreement.
Bankruptcy is
intended to be a last alternative. other options include: consolidation loans to
reduce high interest payments and allow for easier repayment terms.
Consolidation doesn't help, however, if the source of the problem is too little
income for too much debt.
The Consumer
Credit Counseling Service in your area can also be considered. For a nominal
fee, they will attempt to formulate a repayment schedule with your creditors.
Some creditors will forego further accrual of interest charges as long as you
comply with the repayment schedule. The Consumer Credit Counseling Service is a
non-profit organization which is partially funded by large institutional
creditors. It should be considered when you have enough disposable income to pay
your total debt within three and a half years, but cannot get the cooperation of
creditors to accept minimum payments.
Please do not hesitate to send us an e-mail (info@ruthtechnology.com) if you have questions, comments or if
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