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Get Back on Your Feet After Bankruptcy

After a bankruptcy, it can be hard to get back on your feet. However, it is possible to rebuild your credit after bankruptcy, but it will take time and effort. At Oregon Fresh Start, we can help you rebuild your credit and get back on your feet.

Call us today at (541) 262-0040 to get started on your credit repair!

The Bankruptcy Process

In the United States, bankruptcy is governed by federal law. The process begins when a person or business files for bankruptcy. The court then appoints a trustee who will administer the bankruptcy estate. The debtor then must file a statement of financial affairs and a schedule of assets and liabilities. If a debtor fails to do this, the court may dismiss the bankruptcy case.

Once the court approves the bankruptcy petition, the following steps will begin:

  • The court will issue an automatic stay, which stops creditors from any further collection activities.
  • The court will hold a hearing 30 days after the automatic stay is issued. The court will then decide whether the bankruptcy will be approved or dismissed.
  • After the bankruptcy is approved, the court will issue a discharge order. The discharge order discharges the debtor from any remaining debts after the bankruptcy proceedings.

What Is a Chapter 7 Bankruptcy?

A chapter 7 bankruptcy is a type of total bankruptcy. This type of bankruptcy is sometimes called a liquidation bankruptcy because the court will liquidate the debtor's assets to pay off their debts. A chapter 7 bankruptcy can be beneficial because it provides a fresh start for people who have too much debt and no way to pay it off.

Chapter 7 bankruptcy is useful for:

  • People with little to no income
  • People who have a lot of debt
  • People who want to discharge most of their debt

Under a chapter 7 bankruptcy, certain debts cannot be discharged. These debts include taxes, student loans, and child support. If you want to discharge these debts, you may want to consider a Chapter 13 bankruptcy.

What Is a Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy is also referred to as a reorganization bankruptcy. This type of bankruptcy is for people who have a regular income. A Chapter 13 bankruptcy reorganizes the debtor's debts into a payment plan that lasts for three to five years.

Chapter 13 bankruptcy is useful for:

  • People who do not qualify for a Chapter 7 bankruptcy
  • People who have a regular income
  • People who want to keep their property

Chapter 13 bankruptcy is often more complicated than a Chapter 7 bankruptcy. If you are considering Chapter 13 bankruptcy, it is a good idea to consult with an experienced bankruptcy attorney. At Oregon Fresh Start, we have years of experience helping people rebuild their credit after bankruptcy. Let us help you as well.

What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

There are several differences between Chapter 7 and Chapter 13 bankruptcy. The most significant difference is that Chapter 7 bankruptcy involves liquidating the debtor's assets to pay off their debts. Chapter 13 bankruptcy involves a payment plan to pay off the debt within three to five years.

Other differences between Chapter 7 and Chapter 13 bankruptcy include:

  • The amount of debt you can have in Chapter 7 bankruptcy is much lower than the amount of debt you can have in Chapter 13 bankruptcy.
  • Chapter 7 bankruptcy is a faster process than Chapter 13 bankruptcy.
  • Chapter 7 bankruptcy requires the liquidation of assets while Chapter 13 bankruptcy requires the repayment of debt over a period of time.
  • Chapter 7 bankruptcy is often referred to as a "straight bankruptcy" while Chapter 13 bankruptcy is often referred to as a "reorganization bankruptcy."

What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

When it comes to bankruptcy, people often wonder what the difference is between Chapter 7 and Chapter 13 bankruptcy. In this blog, we will explain the differences between these two types of bankruptcy.

Chapter 7 bankruptcy involves:

  • Liquidating assets to pay off debts
  • The automatic stay, which prevents creditors from further collection activities
  • A discharge of remaining debt

Chapter 13 bankruptcy involves:

  • A payment plan to pay off debts over time
  • The automatic stay, which prevents creditors from further collection activities
  • A discharge of remaining debt

Have Questions?

We Have Answers!
    Secured creditors (those creditors who have collateral for their loans, such as a car or boat) will want you to reaffirm the loan. When you reaffirm the loan, you re-obligate yourself to all of the loan terms just as if you were getting a new loan from the creditor. Although this may sound harmless, it has serious consequences. If you reaffirm and then later default on the loan, you are personally liable to pay the balance and you will have no protection on that debt from the bankruptcy. One of the major changes made to bankruptcy law in 2005 is that a creditor can repossess the collateral if you do not reaffirm. This change does not apply to real estate debt. Your reaffirmation agreement is subject to court approval in some circumstances. If your income is less than your monthly expenses, you may be required to participate in a telephone hearing with the court where you will be required to explain to a bankruptcy judge why the reaffirmation is in your best interest and how you intend to make the payment. More often than not, when you file bankruptcy, you owe more on the collateral securing the loan than it is worth. If your loan is more than 2 1/2 years old, under a process called REDEMPTION, bankruptcy law allows you to reduce the amount owing on the debt to the value of the collateral if you can pay it all at once. Many debtors can find a source of family financing or, perhaps, borrow from a 401K account, etc. and come up with the full value. There is also a company on the internet that specializes in redemption funding for cars. Talk with OREGON FRESH START about this for more information. WOULDN'T IT BE BETTER TO SETTLE MY DEBTS THROUGH A DEBT CONSOLIDATION PLAN? Although there may be a few reputable credit counseling services out there, most will not and cannot give you what they promise. Usually, they promise they can settle your debts for 50 cents on the dollar and that when you get done, you will have great credit. The facts are that (1) most people do not complete the "plans" because they usually do not work, and if you do complete the plan, (2) your credit is trashed. Creditors report to credit bureaus exactly what happened. If you get hooked on a 50% plan, your credit report will show that you did not pay all of the debt and that the unpaid balance was charged off. Most creditors do not waive interest or late fees. In addition, most credit counseling programs will charge you a fee (a portion of each payment) and they often do not send your money to the creditors for several months. This gives them an interest-free loan working with your money. Most debtors would be better off filing a Chapter 7 or Chapter 13 bankruptcy which can force the creditors to accept your terms of repayment. In addition, and this is a big one, the amount that was charged off by the creditor will likely be reported to the IRS with a 1099 tax form and you will be required to pay income taxes on the charged-off amount which will be a very unpleasant surprise for you when you file your tax returns for that year. CAN STUDENT LOANS BE DISCHARGED? Yes, but it is not easy. It will also, probably, be expensive. Once upon a time, federally guaranteed student loans were dischargeable if the loan was more than 7 years old. In 1998, the federal government changed all that. Now, federally guaranteed student loans cannot be discharged unless you can prove that being required to repay the loan will cause an undue hardship - not just a hardship, but an "undue" hardship. To have an opportunity to prove your case, you will be required to sue the federal government in bankruptcy court through an adversary proceeding. You will be required to prove all of the following: repayment of the loan would prevent you from maintaining a minimal standard of living your financial circumstances are not likely to change in the foreseeable future you made a good faith effort to repay the loan before you became unable to pay Frequently, the federal government will try to show that you could get a reduced payment plan by going through a consolidation program that will stretch out your payments for 20 years or more based upon an "ability to pay." In short, it is possible to discharge a student loan, but the government has made it very difficult. Also, remember that the government has a raft of lawyers to defend the federal government in the lawsuit who are paid for by your taxes. On the other hand, you will be required to pay for your attorney.
    It is not uncommon for you to owe money to a relative. As discussed in other answers to questions, you must list every debt. This includes debts you owe to your family members. The bankruptcy court looks closely at loan transactions between family members. As we all know, if we owe money to several creditors and one of them is a family member, we will probably be inclined to pay the family member first. In a bankruptcy context, this often means that family members have been paid while the other creditors have not been paid. One of the main ideas behind filing bankruptcy is that all creditors share your misfortune equally. One of the questions asked in the bankruptcy petition is whether you have repaid any loans from relatives within the past year. If you have, you are required to disclose the amount. If the amount is large enough, the bankruptcy trustee has the power to get the money back from the relative and spread it out equally among all the creditors. While there is no set rule as to what amount is "large enough," if the amount were $2,000 or more, that would definitely be "large enough." There are other factors that go into the trustee's decision, including whether you have any other assets which exceed the exemption amounts and how likely it is the trustee can obtain a return of the money from the relative. A relative who has already spent the money and whose only source of income is Social Security is not likely to be a target for the trustee. If you have a loan from a relative and are considering filing bankruptcy, stop paying on the loan until you consult with OREGON FRESH START.
    If you transfer any of your property to a relative, even by selling it, within 1 year of filing for bankruptcy, the bankruptcy trustee can reverse that transfer if it was transferred for less than the fair market value of the property. For example, if you gave Uncle Joe your car 30 days prior to filing bankruptcy because you did not want it to show as an asset in your bankruptcy, the trustee has the power to sue Uncle Joe and get the car back. Unfortunately, some people engage in such an activity before consulting with an attorney. It is also not advisable if you have already made the transfer to attempt to transfer it back without first obtaining expert legal advice.

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