This virus is hurting some people much more than others, and no one really knows when (or if) their own financial situation will turn around. We know that many people are hurting financially, even though creditor collection activity is way down… at least for now. Foreclosures are down, suits and garnishments are down, and repossessions are down. However, people are in trouble because so many aren’t paying their bills… because they can’t. This non-payment ripples throughout the economy. Lenders and landlords have payroll to meet too, and their own bills to pay. Everyone is intent on getting back to normal, including creditors. It’s getting urgent.
The courts are still in business, but it’s been different in recent months. Courts, including the Bankruptcy Court, are avoiding in-person hearings to avoid spreading the virus, and are conducting telephonic hearings instead. This actually works well. It is quicker and it’s not painful, and it allows people to avoid unnecessary travel. People who are out of town for one reason or another can participate in their hearings as if they were attending court in person.
The pressure is building though. Sooner rather than later, creditor collection activity will probably pick up again dramatically. In that case, you may need the kind of help with your debt that we offer.
When you file either Chapter 7 or Chapter 13, the Automatic Stay has an instant effect, and prohibits collection calls, suits, garnishments, repossessions and foreclosures. This is a matter of federal law, and it supersedes contrary state law
that usually forms the basis for collections. Violations of the Automatic Stay by creditors are punishable by court-awarded damages. The Automatic Stay freezes creditors’ collection activity until the legal process can work its way out.
The basic idea in Chapter 7 is that general unsecured debt (credit cards, bank loans, medical debt, repossessions, old tax debt, and the like) are “discharged” (wiped out) without payment. This should free up your disposable income so that you can pay the debt that you might want to keep (like co-signed debt or debt secured by cars or houses), and debt you can’t get rid of, like student loans, recent taxes, and domestic support obligations.
In most Chapter 7’s, debtors can choose to keep and continue to pay for high priority secured debt like mortgages and auto loans. This is called a “reaffirmation”, and it requires creditor consent. If the debtor is current in his payment on those debts, creditors are almost always agreeable, because they make money on performing loans, and lose money otherwise. In Chapter 7, when a creditor takes back collateral, he can’t collect on the “deficiency” if the collateral is resold for less than the debt that was owed to him, as he might be able to do at state law in the absence of a bankruptcy.
In both Chapter 7 and in Chapter 13, all of your debt is “listed” (disclosed). Then, your Chapter 13 Plan or your Chapter 7 Statement of Intentions is used to inform all parties about which items you want to keep and continue to pay for. You do not lose property just because you list it.
Chapter 13 is a “reorganization” case that usually lasts three to five years. It
is voluntary, so if you come to believe that the burdens outweigh the benefits to you, you can get out of it. In Chapter 13, you do not necessarily have to pay your unsecured debt in full. This can make your monthly debt payments much cheaper. Moreover, in Chapter 13 you can force secured creditors to accept reduced payments on secured debt like auto loans, and you can cure mortgage defaults over time… even if the loans are in default, and even if the creditors do not consent. Each case is different, so you have to explore what this means to you personally with an attorney.
Bankruptcies provide instant relief, and can be used for temporary or permanent relief from problems that can’t be solved any other way. The economy is being impacted dramatically by the virus, but the negative impacts are inconsistent, and are changing over time. The government has helped some people, but not others. It is not shameful to need help, and it is not shameful to explore your options to get a more specific understanding of the best path for you.
We have nearly 50 years of combined experience in this field.
Call us at 770-683-3303 for a consultation. We’ve got your back.