Chapter 7

The vast majority of people who declare bankruptcy file for Chapter 7 protection. While there are some restrictions, primarily due to income limitations, Chapter 7 allows you to eliminate credit card debt and medical bills. Some debts however, such as alimony, student loans, and most tax liabilities cannot be discharged. Assets of significant value are turned over to the bankruptcy court; however, most individuals who fall in this category do not turn over assets because they are not of significant enough value.  In addition, certain property of lesser value, such as an older car or household furnishings, may be exempted from being turned over to the bankruptcy court.  With respect to your home, if you are behind on your mortgage payments and the bank is threatening foreclosure, chapter 7 unfortunately will not save you.  A chapter 7 filing will not discharge your mortgage obligations.
Please note that this is a very brief explanation designed only to give you a broad understanding of what a chapter 7 is all about.  We will discuss your case in detail at our first meeting.  

Chapter 13

Chapter 13 gives you the opportunity to save your home from foreclosure.  Often times these are the people who have hit a “bump in the road” and have fallen a few months behind on their home mortgage and meanwhile have accumulated a fair share of credit card debt as well, but are now “back on their feet.” If you can prove to the court that your income now allows you to meet your mortgage payments and other monthly expenses, a chapter 13 gives you the benefit of catching up on the mortgage payments that you still owe over a gradual period of time, typically lasting three or five years and saving your home from foreclosure. In addition, while it will not completely eliminate your unsecured debt, like credit cards and medical bills, it will certainly greatly reduce the amount owed. Also, for those who own a home with two mortgages, you may be able to benefit from what is commonly referred to as “lien stripping.”  Under certain circumstances, you may be able to eliminate your obligation on the 2nd mortgage on the home.

Again, please note that this is a general explanation designed only to give you a broad understanding of what a chapter 13 is all about.  We will discuss your case in detail at our first meeting.