Pasco Bankruptcy Attorney
Being in debt is terrifying. You can feel like there is no end, like no matter what you do, you will never be able to pay all of the debt off. It is especially awful if your debt is in collections, and you have to deal with threatening collections calls or even garnishment.
Luckily, there is a way out. When you need help getting out from under your debts, you need the help of highly knowledgeable and skilled bankruptcy attorneys. Contact Symmes Law Group for a free consultation and case review to see if you can use bankruptcy to your advantage.
Bankruptcy in Pasco Explained
Going “bankrupt” is a popular term in casual conversation that is used to mean that a person has gone broke or run out of money. However, this is not entirely accurate. Bankruptcy is actually a legal process. You do not need to be completely out of money to declare bankruptcy, in fact, bankruptcy is used frequently by people who have steady jobs but just cannot get out of debt.
Bankruptcy provides for a process known as “discharge,” wherein your unsecured debts (debts that are not attached to collateral, like credit card debt) can be essentially erased. This is unique in the law, as this is one of the only legal processes by which the government has provided a process for the erasure of privately-held debt.
There are different types of bankruptcy that all have different benefits and disadvantages. Further, some bankruptcies might have different requirements for who can qualify for this type of bankruptcy. The most common bankruptcies filed by individual debtors are Chapter 7 and Chapter 13, which are explained below:
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a “liquidation” bankruptcy, meaning that a government appointee (called the Trustee) may take control of some of your property for the purposes of selling it and giving the money to your creditors. With that said, most assets are protected through rules called exemptions. Only certain people under the WA states median income for a household size, those that pass the means test or debtors who have mostly non consumer debt qualify for Chapter 7 bankruptcy because of its highly forgiving nature in most cases. As an example, a debtor who makes up to $76,900 as a household of 1, may qualify for chapter 7 bankruptcy.
Pros of Chapter 7 bankruptcy:
- Complete forgiveness of unsecured debt in most cases
- If you do not have any non-exempt assets, you will not lose any of your property
- You have the option of assuming secured debts, meaning that you can continue paying certain debts (such as a car loan) to keep that property.
Cons of Chapter 7 bankruptcy:
- Means testing- only certain people (under a certain income) qualify in most cases
- Non-exempt property can and will be taken from you to repay some of your debts
- You will not get to forgive your secured debts (such as a mortgage or car loan) and still retain the property, meaning if you want to keep the asset, you need to pay for it.
- Negatively affects your credit for 10 years, although in most cases it may only affect somebody for a couple of years.
Chapter 13 Bankruptcy
The other main type of bankruptcy is Chapter 13, which is called a “wage earner’s” bankruptcy. Chapter 13 is very different from Chapter 7, in that you will have to pay some of your unsecured debts over the course of 3 to 5 years. However, there are advantages to filing this type of bankruptcy.
Pros of Chapter 13 bankruptcy:
- Easier to remove from your credit report- Chapter 13 bankruptcy typically only lasts 7 years instead of 10.
- You will keep all of your property in most cases
- Very high debt limit- you will be able to file Chapter 13 bankruptcy as long as your unsecured debts are lower than 2.75 million dollars.
Cons of Chapter 13 bankruptcy:
- You will have to pay at least some of your unsecured debts (by definition, this is more than you would pay in a Chapter 7 bankruptcy)
- A chapter 13 plan can be restrictive as all disposable income should be committed to a chapter 13 plan.
- The time commitment- Chapter 13 bankruptcies require that you be dedicated to making payments for 3 to 5 years.
Your Pasco bankruptcy lawyer will sit down with you to discuss the benefits and disadvantages of each type of bankruptcy so that you can determine what is right for you. With the help of skilled bankruptcy attorneys, you can create a bankruptcy plan that helps you get out of debt.
Benefits of Bankruptcy for Pasco Residents
Bankruptcy, whether Chapter 7 or Chapter 13, comes with two main benefits: the automatic stay and the discharge injunction. Both of these benefits have to do with the forgiveness of your debt and stopping your creditors from trying to collect it.
The Automatic Stay is a provision that stops your creditors from trying to collect on your debt. The Automatic Stay is essentially a Court order that orders all of your creditors to immediately cease all collections activities. Violating this order has the effect of contempt of court, meaning that you can collect damages from your debt collectors if they violate the stay, such as by:
- Sending you collections letters
- Calling you attempting to collect debt
- Suing you for debt collection purposes
- Continuing to prosecute already filed debt collection lawsuits
- Garnishing your wages
- Failing to turn over recently repossessed property of yours to the bankruptcy court.
The Discharge Injunction is a similar concept. An injunction is a Court order, and the discharge injunction is essentially a court order that both declare your debt invalid and extends the automatic stay in perpetuity. This means that your creditors can also be found in contempt of court for attempting to collect discharged debts.
One of the things that is different in bankruptcy is the process by which your secured debts are dealt with. Secured debts are debts that are attached to collateral, such as car loans, mortgages, or rent payments on an apartment. In bankruptcy, your unsecured debts can be wiped away, but your secured debts are slightly more complicated.
Normally, in bankruptcy, you have the option of erasing your secured debts. However, if you choose to do this, the creditor of such debts can simply take the collateral back from you, like a foreclosure. You do, however, have two options to keep the property.
First, you can assume the loan. This means that you will essentially remove that one particular loan from your bankruptcy case and pay it as you normally would have. Second, you can redeem the loan, which means that you will immediately purchase the property from your creditor at its current value. Both of these options have pros and cons, and your bankruptcy lawyer will help you decide the best option for you.
Appearing in Court for Bankruptcy
While bankruptcy is a legal process with its own specialized court, you might be surprised to learn that you probably will not actually have to appear in court in most cases. This is different than it has been in the past, but recently, bankruptcy courts have streamlined the bankruptcy process and made it so many court appearances can be done virtually through zoom or over the phone.
For example, the only real court appearance that needs to be made in most bankruptcy cases is the Meeting of Creditors. This hearing is essentially a hearing where the Trustee and (maybe) some of your creditors will ask you various questions about your debts to ensure that you did not incur these debts, for example, through fraudulent means.
The meeting of the creditors, in modern times, is done over the phone, meaning that you will not have to appear in court. While it is possible that some of your creditors might come to ask questions of you, they do not do this in the majority of cases. This means that your one court appearance is more likely than not to last around 5 minutes. Your bankruptcy lawyers will discuss the full process with you.
Effect of Bankruptcy on Your Credit
While bankruptcy is a life-saver for most people, you should be aware that a bankruptcy case can lower your credit score. However, you should also know that if you already have poor credit (like most bankruptcy debtors), a bankruptcy filing can actually increase your credit score, as you will have less debt and therefore be less of a credit risk.
For example, while someone with a very high credit score (say, 780) might see their credit score go down by 200 to 240 points, someone with a very low credit score (say, 450) can actually see their credit scores increase, sometimes as much as 50 points.
Further, the type of bankruptcy that you filed, chapter 7 or chapter 13, may determine how long the negative credit effect lasts. While Chapter 13 bankruptcy filers can start repairing their credit almost immediately, some people find that the forgiveness of Chapter 7 bankruptcy is worth the hit to their credit. Make sure to discuss all of your options with your Pasco bankruptcy lawyers to know all of your options.
Contact a Pasco Bankruptcy Lawyer
Being in heavy debt does not have to ruin your life. Bankruptcy can be, and is, for a lot of people, the solution to your debt problems. You should avail yourself of this lifeline if you are in extreme debt.