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                                                                                                                   The decision to file for personal Bankruptcy is never an easy one, even with the number of Bankruptcy applications on the rise due to the current economic situation in the United States.  Filing a Bankruptcy Petition causes creditors to immediately stop action to collect a debt, or to repossess property or foreclose a mortgage without court permission.  At Mendoza & Associates, P.C., we can help you make the key decisions surrounding whether Bankruptcy is the right choice for you and which option will best suit your needs.                                                      

Our attorneys can help you navigate every step of the Bankruptcy Process with compassion and comprehensive guidance, not judgment.  We are here to explain your legal options and help you achieve a fresh start if you decide to file a Bankruptcy Petition.

Chapter 7

A "straight" bankruptcy, discharges debts, such as most kinds of medical bills and credit card debt, but also can cause loss of property which is not "exempt."  This property must be sold by a court appointed trustee for the benefit of your creditors.  "Exempt" property is property which is preserved by state or federal law from sale to re-pay creditors because it is necessary for the functioning of your household.  The dollar limits and kinds of "exempt" property vary from state to state.

In addition, property that has been used as security for a debt is subject to loss, unless you pay the creditors its resale value in a lump sum, or the creditor agrees to take installment payments.  Some "exempt" property (household goods, professional tools) may be preserved even though it was used as security for a debt.  Certain debts in addition to alimony and child support are "non-dischargeable."  This means that a creditor can object to their discharge.  Some examples of "non-dischargeable" debts are:

  • Back taxes (city, state and federal);
  • Fines or penalties imposed by the government;
  • Debts that you failed to list on your Bankruptcy schedules;
  • Student loans due and owing less than five years (unless extreme hardship is shown);
  • Debts for fraud, disposal or property used as security for a debt, embezzlement, larceny;
  • Debts for credit obtained with a false financial statement

Chapter 7 wipes out dischargeable debts and can serve as debt relief from credit card debt, but property which is "non-exempt" from use for debt repayment is subject to loss.

Chapter 13

A "regular income plan" is designed for people who have some regular income over and above their current living expenses (food, rent, mortgage, clothing, utilities, etc.)  As a Chapter 13 debtor, your propose a repayment plan for debts which can be repaid within three to five years and make regular payments to a court-appointed trustee.  All remaining debts not paid through the plan are discharged, except for alimony and child support.  The last three years' taxes must be paid through the plan.

                                                                                  Usually no property is lost through a Chapter 13.  Property is given as security that can be redeemed at its resale value through payments to the trustee.  A default on a mortgage can also be cured by payments to the trustee.

You are eligible for a Chapter 13 if you have enough income to meet your current living expenses and have some left over.  The left over income is used to repay debts you can afford within three to five years and discharges the rest, except for alimony and child support.