Consumer bankruptcy, also known as personal bankruptcy, is a type of bankruptcy filed by individuals or spouses when they can no longer afford to pay their debts. Individuals and spouses can file under Chapters 7 and 13 and, less frequently, under Chapter 11. In this article, we’ll discuss consumer bankruptcy and how a Eugene, OR bankruptcy attorney can help you manage crippling debt.
Chapter 7 Bankruptcy in Oregon
Chapter 7 bankruptcy is also called “straight bankruptcy” or “liquidation bankruptcy”. It can discharge unsecured debts such as medical debt or credit card debt, and absolve you of your obligation to pay on secured debts such as a mortgage or car.
Those who file under Chapter 7 will need to list all of their debts in their bankruptcy paperwork and the bankruptcy trustee will attempt to repay creditors by liquidating any valuable assets. Since Chapter 7 has an income limit to qualify (you can only make so much money or have so much disposable income) the bankruptcy trustee seldom finds anything of value to liquidate. In addition, you can protect valuable assets up to a certain amount.
Chapter 7 is the most popular chapter of bankruptcy for consumers, individual filers, and married couples.
Chapter 7 Bankruptcy and Secured Debt
Those who are seeking to prevent a foreclosure or a car repossession can file under Chapter 7, but it won’t help them save their home or their car. They have two options in Chapter 7. They can either divest their interest and let the lender take back the property they owe on or reaffirm the debt and continue to make payments. It should be noted that if they fail to make payments, they won’t be able to file again for another 8 years. So if the bank forecloses on your home or the lender declares that your car loan is in default, you may not only lose your car but be responsible for repaying some of the debt which could have been discharged by giving up the property.
Chapter 13 Bankruptcy in Oregon
Chapter 13 is the second-most common type of consumer bankruptcy. While it does not offer a full discharge of unsecured debt like Chapter 7 does, consumers who file under this chapter do not have to worry about which of their assets will be liquidated. Chapter 13 is also better suited to handle certain types of debt such as a mortgage or a car loan.
Those who file under Chapter 13 do not have to meet any minimum criteria for how much income they earn, but they may have to deal with maximum debt limits. In other words, while you can never earn too much money to file under Chapter 13, you can owe too much money.
Chapter 13 works by reorganizing your debts into a manageable monthly payment that is executed over the course of three or five years. This assumes that you can afford to make the monthly payment necessary to repay certain priority debts. Priority debts include non-dischargeable payments like child and spousal support, some tax debt, and certain types of fines or civil judgments arising from a DUI accident. These are rolled into your Chapter 13 repayment plan alongside secured debts such as your mortgage and car payments. Depending on your income, you may have to repay some of your unsecured debts as well, but the upside is that you get to keep your home and your car.
Dealing With Aggressive Creditors
One of the most appealing aspects of bankruptcy is that it stops any creditor action against you in its tracks. This includes wage garnishments and creditor lawsuits. Creditors can no longer even so much as send you a letter through the mail in an attempt to collect the debt.
Additionally, as a consumer, you are protected from certain kinds of creditor harassment as outlined in the Fair Debt Collection Practices Act. Debt collectors are only allowed to call at certain times during the day, are not allowed to harass you by calling repeatedly, cannot tell family, friends, or employers that they are attempting to reach you for the purpose of collecting a debt, and may not lie to you by threatening a lawsuit that they are not legally entitled to initiate.
If a creditor has done any of the above, you should mention this to your bankruptcy attorney.
Find a Bankruptcy Attorney in Eugene, OR
If you have any questions concerning consumer bankruptcy, please feel free to call Tom at Butcher Law Office, LLC to schedule a free hour-long consultation. We will have a face-to-face and go over your situation to determine what your best course of action should be. Call today and we will begin the process of putting you back on the path of financial freedom.