Drowning in Debt? Can bankruptcy be the answer?

Posted on: December 10th, 2013

Disability and debt often go hand in hand unfortunately.  Those who are sick and out of work will face a pile of bills, collection phone calls, and threatening letters.  I sat down with attorney Barbara Snavely to discuss how bankruptcy may help my clients.

There are two types of bankruptcies for individuals, Chapter 7 and  Chapter 13.   A Chapter 7 works best for those who:

-       have lots of unsecured debt (for example, credit cards, utility bills, unsecured personal loans);

-        do not own much property;

-       do not have much income.  The maximum income for an individual is approximately $60,000 per year; for a family of four, it’s around $100,000.

In a Chapter 7, a trustee who is appointed by the court gathers and sells your non-exempt property.  The proceeds from the sale are used to pay your creditors  according to the priority of the claims.

A Chapter 13 is a good option for those who:

-       owe debt that is the result of a temporary financial setback;

-       own lots of property, such as houses, land, cars, that you want to

entirely protect;

-       have steady, regular income with which to make payments to a trustee;

-       are behind in rent, mortgage or car payments.

A Chapter 13 works to consolidate, order and, in some cases, reduce your debts.  Then, instead of juggling your bills and creditors, you will make one monthly payment (except for home mortgage and car payment loans) to your court-appointed trustee who will handle your creditors.  No more calls from creditors!

Once your bankruptcy case is filed with the court, your creditors cannot collect on your debts because of what is call and “automatic stay.”

Social Security Disability payments are protected in bankruptcy in most cases.  Since SSI payments are intended to provide basic living expenses, they may never be taken in a bankruptcy.

The prospect of filing bankruptcy can be frightening.  Just talking to a bankruptcy attorney does not necessarily mean you have made a decision.  It can just be part of an information-gathering process.  Don’t wait until your circumstances are desperate and you only have days in which to stop foreclosure, vehicle repossession or other collection actions.  Consultations are usually free.

This is a simplified overview of the options.  There are numerous guidelines for each type of bankruptcy.  Get professional advice from an attorney who concentrates in the area of bankruptcy.   Barbara Snavely is an associate in the Law Office of Joseph Rogers in Turnersville.  She can be reached at (856) 228-7964.

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