Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
Before filing a personal bankruptcy, sitting down with all the facts on hand can help you make the hard decision a little bit easier to make. In this article, we will try to state all relevant information for your bankruptcy so that all terms, definitions and options have been discussed.
Difference between Chapter 7 and Chapter 13 Bankruptcy
Chapter 7 bankruptcy is usually for individuals with no assets. This can be a house, a family business, boat, cars or a savings account. A chapter 7 bankruptcy is filed if you want to be discharged from responsibilities to dischargeable debts. There are certain debts that are not dischargeable such as student loans, income taxes and child support. Most of the time, all it takes is four months before the court gives a discharge from all dischargeable debts for the claimant. A chapter 13 bankruptcy, on the other hand, is for individuals with some assets or has a steady income. The individual who files this type of bankruptcy desires to pay off their debts over a period of three to five years. Filing for this type of bankruptcy gives the individual a court protection from collection agencies or other companies attempting to collect a debt. It also opens the way for the debtor to keep their house or other assets even though they might be behind on payments.
What Is the Process for Filing for Bankruptcy?
You can try to file the application yourself; however, most people consult lawyers to file the papers for them. The application fee is around $300 and lawyer’s fee range from $1000 to $2000. Most initial consultation with a bankruptcy lawyer is done free of charge. The lawyer would most likely be the best person to help you decide if you would need to file a chapter 7 or 13 bankruptcy.
What Happens after I File for Bankruptcy?
As soon as the papers have been filed with the courts, a trustee in charge of your case sends out court letters to all creditors listed on your application letting them know that bankruptcy papers have been filed. They will stop all attempts to collect. Within a said time, the court will give a ruling on your case. For chapter 7 bankruptcy, the court will either give a discharge or reject your case. All bankruptcy files are public record until after seven years. Beginning on the eighth year, you must return to the courts to request that your records be removed from public records. You must do the same with removing negative record from your credit history at this time. For chapter 13 bankruptcy, the court will lay out a payment plan for the debtor. Depending on your income, it can be three to five years. The courts will give you your discharge papers when all debts as modified in the payment plan have been paid off in full.
What Other Consequences Are There to Filing?
Your credit score will drop considerably. Many or all credit card companies will close their accounts with you. You can open a credit account but it will be high in fees with high interest rates. You will need to be diligent so that you build your credit score back up. Your bankruptcy status will be known to anyone looking at your credit history. Apartments, car loan companies and mortgage companies will most likely consider you as a client after your two years into bankruptcy have passed.
- What To Do When Mortgages Default
- FHA Eligibility with Bankruptcy and Foreclosure
- Should You Refinance? Make Sure the Timing is Right
- 3 Warning Signs of Loan Modification Scams
- 3 Reasons Banks Reject Short Sales
- How to Get Approved for an FHA Loan despite Bad Credit
- Low Down Payment Loan Qualification
- 3 Common Short Sale Mistakes
- What Lenders Don't Reveal About Home Equity Loans