Frequently Asked Questions

Home / Uncategorized / Frequently Asked Questions

The following are questions that I am often asked by prospective clients. The responses are general but I hope informative. You should consult with an experienced South Carolina bankruptcy attorney to see how a bankruptcy filing will affect your particular situation.

How Can Filing Bankruptcy Help Save Your Home from Foreclosure?

If you have fallen behind on your mortgage loan payments and are facing a foreclosure, a Chapter 13 bankruptcy offers an effective means to stop the process and catch up on the past due payments. Chapter 13 offers a person with a steady income the opportunity to cure or “catch up” the past due mortgage payments over a 3- to 5-year time period. During this time, you will have to make payments to the Chapter 13 bankruptcy trustee that will repay the past due amounts during the time the case is pending.

In addition, when you file a Chapter 13 petition, your creditors are precluded from continuing with debt collection calls. The “automatic stay” (a federal court order) protects debtors from creditor calls during the bankruptcy case.

Will a Chapter 13 Bankruptcy Filing Help Prevent Repossession of a Car or Truck?

Chapter 13 offers many advantages to people who have fallen behind on their vehicle loan payments. First, the bankruptcy filing will give you an opportunity to catch up on past due amounts through the Chapter 13 plan payment. In addition, if you purchased your vehicle with a loan more than 910 days from the day that you file bankruptcy, you may be able to “cram down” the loan amount that you have to repay through the bankruptcy. For example, if the loan was originated 3 years ago and remaining balance due on the loan is $10,000.00 but the value of the vehicle is only $6,000.00, a Chapter 13 bankruptcy may allow you repay only $6,000.00 as the secured portion of the debt. The remaining $4,000.00 will be considered “unsecured”. Depending on the amount of your “disposable monthly income”, you may have to repay as little as one percent of the unsecured amount of the loan.

What is the “Automatic Stay”?

The filing of a bankruptcy petition triggers the automatic stay, which is a federal court order that prevents creditors from continuing collection efforts such as debt collection calls, foreclosures, evictions, wage garnishments, bank levies and other collection activities. I like to describe the automatic stay as a type of “force field” that is invoked by federal bankruptcy laws to protect the person who filed bankruptcy.

The automatic stay can stop a mortgage loan foreclosure lawsuit if the petition if filed before the sales date. However, you should not wait until that late in the foreclosure process to initiate a bankruptcy filing because you will be required to provide a good amount of information about your financial condition to the court. You will need time to gather that information and work with your attorney to complete the bankruptcy documents that must be filed to trigger the automatic stay.

What is the Difference between a Chapter 7 and a Chapter 13 bankruptcy?

Chapter 7

Most consumer bankruptcies are filed as Chapter 7 and Chapter 13 cases. A Chapter 7 filing is a called a liquidation. In most cases, this is the preferred alternative. The catch is that to qualify your income must be below a median amount of income in South Carolina. This amount changes from time to time. Even if your income exceeds this amount, you may still qualify if you have “allowed” expenses that reduce your income level. The determination of whether you have allowed expenses should be made in consultation with an experienced South Carolina bankruptcy attorney.

At the conclusion of a Chapter 7 bankruptcy, the debtor is “discharged” from most of his or her unsecured debt, e.g., credit card debt, medical expenses, personal loans. This means that after the bankruptcy case is concluded, you will no longer owe this debt. The unsecured debt that may be discharged does not include most student loan debt, domestic support obligations, some tax debt and other types of unsecured debt that is considered “priority debt”.

A Chapter 7 case usually lasts from five to six months. During that time, the debtor is protected by the automatic stay.

Chapter 13

If you are past due on a car loan or mortgage loan, Chapter 7 will likely not be the best option for you. Chapter 13 debtors are given the opportunity to catch up on past due amounts of debt through a confirmed Chapter 13 plan. Someone filing a Chapter 13 will be able to repay arrearages (catch up on past due amounts) during the bankruptcy case, which is usually five years. The automatic stay protects the debtor during the entire five years.

To qualify to file a Chapter 13, a person must have sufficient “disposable monthly income” to support a plan payment and to make his or her mortgage payments directly to the lender. Your disposable monthly income is the amount of income left over after you pay your usual monthly expenses, e.g., house payment or rent, utilities, food expenses, taxes, insurance etc. Your bankruptcy attorney will work with you to determine what expenses are acceptable and what is considered to be the standard expense amounts for South Carolina.

In a Chapter 13, you must repay some portion of your unsecured debt (credit cards, medical debt). The amount that must be repaid is determined when you establish what your disposable monthly income is. Again, advice and counsel with an experienced South Carolina bankruptcy law attorney is recommended for this determination. You should know, however, that many Chapter 13 plans are confirmed (approved by the court) that provide for repayment of as little as one percent of the unsecured debt.

Leave a Comment