When the Debt is Just Too Much
By: Alex Rechenmacher

With the recent recession and problematic levels of unemployment in recent times, combined with over-extension of credit, our country saw record numbers of filings for bankruptcy in the last two years. For individuals, filing Chapter 7 or Chapter 13 bankruptcy is an option where you can seek the assistance of the government in obtaining a fresh start on an increasingly uncontrollable amount of debt.

Chapter 7 Bankruptcy is the most common form of bankruptcy filing for individuals or families. A filing under Chapter 7 is often called "straight bankruptcy" or "liquidation". Under Chapter 7, the debtor converts certain "non-exempt" assets and/or property to money. If there is enough total value in the estate, the property is then sold and the proceeds are used to pay creditors.

Child support obligations, most taxes, student loans, and some court-imposed imposed debts cannot be discharged. Secured debts, such as for your home or your car, cannot be discharged if you intend to keep the property (but may be reduced by motion to the court). Under new rules adopted through the 2005 Bankruptcy Reform Act, it is now harder to qualify for Chapter 7 Bankruptcy. However, if your debts consist mostly of credit cards, medical bills and other unsecured debts, and you pass a "means" test (a qualification), then Chapter 7 may be the best option for you.

Chapter 13 Bankruptcy allows individuals to reorganize or restructure their debt, rather than eliminate it, but it enables the debtor to keep certain assets that otherwise might be sold and liquidated under Chapter 7. A filing under Chapter 13 is available when a debtor has too much income to qualify under Chapter 7 or they have a large amount of non-dischargeable debt. Individuals who file for Chapter 13 relief are required to pay a portion of their income to a trustee, who in turn pays that proportionally to the debtor's creditors. The process is designed to allow the debtor to use future income to pay off creditors and is completely supervised by the court for periods up to sixty (60) months.

Hiring the Law Offices of Edward P. Graham, Ltd. will ensure that your interest in assets and income will be protected, and a "fresh start" from the burdens of debt is obtained where possible. If you, your family or friends might benefit, please contact us to schedule an initial consultation and conduct a detailed discussion of your options.