When people talk about bankruptcy, they rightly tend to focus on the discharge of their debts. The discharge aspect is important in nearly all cases, but it's not the only tool available in bankruptcy. You may also want to speak with a bankruptcy lawyer about these four other features of the process.
Court Order Staying Collection Actions
After a judge accepts your initial petition for relief, the court will issue an order staying any future collection actions. This means creditors can't keep making harassing phone calls, emails, or texts.
Likewise, a creditor can't initiate a foreclosure or repossession action while the court order is in effect. Note, this doesn't stay any such actions if another court granted them before you submitted your case. However, it might buy you some time if a creditor hasn't completed the process.
Similarly, the court order will stay any eviction actions. Once more, that doesn't apply if a landlord already obtained a judgment allowing an eviction.
Restructuring Debts
You can seek a total discharge of non-exempt debts if you want to. However, you also may have the option to pursue a restructuring of personal debts under Chapter 13 or business ones under Chapter 11. There are some qualification requirements because the court doesn't want people to make restructuring plans they can't keep. Also, the court won't approve a restructuring plan if the judge believes the debtor can pay all that is owed.
You should discuss your plans with a bankruptcy attorney before going in this direction, however. If the court doesn't agree, you will have to restart the process to pursue a full discharge, including paying more fees.
Marking Down Secured Loans and Mortgages
If you have a secured loan for something like a car or a mortgage for a house, a court may consider marking it down. This happens when the market value of an asset drops below what has been paid on the associated loan.
Suppose you have a mortgage for a $250,000 house. Unfortunately, its market value has dropped to $100,000. Likewise, you've paid more than $100,000 on the mortgage. In that scenario, a judge has the right to declare the house effectively yours and discharge the remainder of the loan. Bear in mind, though, that you will have to document both the payments and the drop in the value of the property.
Asset Exemptions
Even if you fully liquidate your debts under Chapter 7, you have the right to request exemptions. You can exempt everyday practical items, such as your clothes and furniture. Some states also offer wildcard exemptions for all types of assets up to a certain threshold.
Share29 April 2022
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