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Q. If I file for bankruptcy, am I protected from my creditors and their collection action?
A. As soon as you file a valid petition, your creditors are prohibited from continuing their collection action. An “automatic stay” feature in the law takes effect, which prohibits further collection action. The court can lift the stay if fraud is discovered or you fail to follow the rules of the bankruptcy.
Q. Which type of bankruptcy should I use?
A. It depends on your situation. Most people choose Chapter 7, which mandates that your assets must be liquidated, with the resulting cash given to your creditors to satisfy some of the monies owed them. Chapter 13 is often a better choice if you want to keep your home or other assets since liquidation is not a requirement. You will be required to pay as much as you can afford to your creditors, but your important assets should be safe.
Q. Can I choose between Chapter 7 and Chapter 13 bankruptcy?
A. For the most part, yes. There are two primary things you should know. First, if you have secured debts of more than $922,975 and unsecured debts of more than $307,675, you cannot use Chapter 13. Second, under the new bankruptcy law, if your income is higher than the “median income” for a family of your size in your state, you may not be allowed to file a Chapter 7 action. You may be required to file Chapter 13, which mandates that you will pay your creditors at least some of the monies owed them. Q. What property could I lose if I file for bankruptcy?
A. If you choose to file Chapter 13, you should lose none of your assets. Chapter 7 bankruptcy will result in the loss of some or all of your assets but no further payments to creditors will be required after liquidation. Therefore, the amount of assets you own combined with your current income will help you determine the best choice for you.