Chapter 7

Obtain a Court order discharging debts

Chapter 7 allows an individual to obtain  a Court order discharging obligations to pay debts. Individuals or families facing a foreclosure on their home should be interested in filing a chapter 7 petition if they conclude that they no longer wish to make the effort to save their home and are prepared to “walk-away” from the house. The Chapter 7 process can result in a discharge of the debtor’s obligation to pay the mortgage, or any deficiency which exists after the sale of the house at foreclosure auction, along with the debtor’s other general unsecured debts.

“Your questions and thoughts reassured me that I have the right attorney to go through this most difficult process.” S.

Retain your home and car

Chapter 7 might be an option for individuals or families who have been successful in obtaining a loan modification on their primary (first) mortgage but still have additional liability to credit cards, medical bills, personal loans etc. which make meeting their monthly household expenses difficult. Lastly, individuals or families that are current with their mortgage obligations but are struggling with other general unsecured debts, or perhaps have a liability on a repossessed car, etc. might consider a Chapter 7 bankruptcy petition to discharge those obligations while reaffirming their obligation to remain current on their mortgage and thereby retain their home.

Means test – Will I be permitted to file Chapter 7?

Chapter 7 debtors are subject to a AMeans Test@ analysis. The Means Test is designed to require individuals or families whose income exceeds the median income to file a Chapter 13 reorganization case rather than a straight Chapter 7 bankruptcy. The current median income for an individual in the State of New Hampshire is approximately $53,000.00. The median for a household of four in New Hampshire is currently set at about $93,000.00. The Means Test analysis is complicated and does not end with those numbers. The analysis allows for the deduction of certain standard expenses, as well as, other individualized debts and expenses. You would be well advised to consult with an experienced bankruptcy attorney if you are concerned about your ability to qualify for filing a chapter 7 bankruptcy under the Means Test calculation.

Chapter 13

Reorganize your finances

Those individuals and families hoping to save their home from foreclosure through the bankruptcy process are more likely to consider filing a Chapter 13 Reorganization case under the Bankruptcy Code. Chapter 13 allows a debtor to propose a plan for repayment of mortgage arrears, including late fees, escrow charges, attorneys fees and foreclosure costs and past due property taxes over a period of 36 to 60 months. In a Chapter 13 Reorganization case a debtor must remain current with their regular monthly mortgage payments going forward from the commencement of the bankruptcy case including payment of property taxes and homeowners insurance while making an additional payment to the Bankruptcy Court sufficient to cure the arrears over the course of 36 to 60 months. Chapter 13 also allows a debtor to pursue the stripping of second and third mortgages where the mortgage is Awholly unsecured@ as mentioned previously. The commencement of a Chapter 13 bankruptcy case will ultimately result in the issuance of an discharge order relieving a debtor of the obligation to pay general unsecured claims such as credit cards, personal loans, etc. A Chapter 13 reorganization case may allow a family to focus on the payment of their mortgage and repayment of mortgage arrears through a monthly plan payment, while preventing the collection efforts of all other creditors.

“Thank you for the time you spent with us. Your explanations were clear and informative. We thank you also for treating us respectfully.” B.G.

Exemptions allow families to retain possessions

Under the vast majority of circumstances individuals and families filing for bankruptcy protection who are current on their mortgage payments or car loan payments (or those who can get caught up quickly) are not at risk of losing their homes or cars by filing a bankruptcy petition. Individuals and families filing for bankruptcy protection are entitled to exempt or protect from creditors’ attachment and liquidation in the bankruptcy process their homes, cars, personal belongings, even their retirement accounts. The asset exemption analysis should be done on a individual basis after careful review of your finances and individual assets.

The bankruptcy process is complex. You should consult with an experienced bankruptcy attorney before deciding whether bankruptcy is right for you. Bankruptcy can offer individuals and families an opportunity to resolve their debt and possibly to reorganize their finances in order to better afford their home.

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