Most people understand that bankruptcy is a way to clear up a lot of debt, but are uncertain of the details. A brief overview of the most common forms of bankruptcy follows.
Chapter 7 bankruptcy is what most people think of when they think of the generic term of bankruptcy. It is the traditional type of bankruptcy that the framers of our Constitution probably envisioned when they proscribed the right in Article 1, Section 8 of the United States Constitution. A person can have nearly all of their unsecured debts discharged, or “wiped out” through a chapter 7 bankruptcy. The discharge does not usually include current mortgages and car loans, and it also does not include most tax debts, child support arrearage and student loan debt. But a chapter 7 usually wipes out all of a person’s credit card debt, medical debt, and most other debts. If a person’s income is sufficiently high, they may not qualify for a chapter 7, and might have to file a chapter 13.
Chapter 13 bankruptcy is often referred to as a “debt reorganization”. A person enters into a 3 to 5 year repayment plan in a chapter 13. The amount of the weekly, bi-weekly, or monthly payment is determined mostly by the person’s monthly disposable income. Chapter 13 bankruptcy is often the best option for people who have a previous bankruptcy filing within 8 years, or people with too much income to qualify for a chapter 7, or for someone who has a house in foreclosure that they want to try to save.
Currently, the U.S. Federal Government is considering changing some of the bankruptcy laws. They are considering a change to allow Bankruptcy Judges to modify mortgages on houses that are over secured. A house is over secured when the mortgage amount exceeds the value of the house. The change in law would conceivably allow some recent home buyers to drastically cut their monthly mortgage payments.
People with a home in foreclosure that are seeking help without filing a bankruptcy can also go to a new website. www.dclmwp.com is a site designed to help homeowners contact the loss mitigation department of most major banks and mortgage lenders. The loss mitigation department is generally designed to assist borrowers in default that wish to bring their loan back into good standing. But if the loss mitigation department is unable to help a borrower in default, a chapter 13 is often the only other way to stop a foreclosure.
Joseph H. Spring, Esq.
MARK E. GODBEY & ASSOCIATES
708 Walnut Street, Suite 600
Cincinnati, Ohio 45202
(513) 241 – 6649 fax
This article was written by attorney Joseph H. Spring. For more information, please visit our web site at www.GodbeyLaw.com or call our office at513-241-6650.