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Will filing Chapter 13 stop the repossession of my property?

The first thing to realize is that upon filing for either Chapter 7 or Chapter 13 personal bankruptcy, your attorney will stop all of the harassing phone calls, collection efforts, foreclosures, wage garnishments and repossessions. While some debt cannot be dismissed, others can be combined, or you can be allowed to decide what stays and what goes. There are New Jersey and federal property exemptions that you must choose from, each containing their own set of plusses and minuses.

What debts will not be dismissed? Things like court-appointed fees, child support, back taxes and student loans may not be forgiven. Other debts called collateralized debts like car loans and mortgages cannot entirely go away, and neither can any credit card debt you ran up within a certain time period before filing for bankruptcy. (That behavior is considered fraud.)

However, the success of your Chapter 13 bankruptcy repayment plan hinges on your ability to maintain regular payments to the bankruptcy trustee during the repayment period, and your ability to regularly meet your routine financial obligations, such as your mortgage, child support payments, etc. Failure to do so could result in consequences that jeopardize your entire bankruptcy petition.

What are some of the other circumstances of filing for bankruptcy? Unfortunately, your credit score and your insurance scores are tired together. This means that your life, homeowners and car insurance payments will go up as your credit scores go down. Some employers even check the credit scores of potential employees. You will probably have to attend credit counseling classes and/or personal financial management training. In addition, Chapter 13 bankruptcy stays on your record for seven years.

One of the biggest misconceptions people have about filing for bankruptcy is that they will lose all of their property, assets, home, car, retirement accounts, household goods, clothing, furniture and wedding rings. That is not the case. However, beware of phony debt consolidation scams. The only way to decide which form of bankruptcy is right for you and enable you to maintain your most prized possessions is by talking to an experienced bankruptcy lawyer.

Source: The Commercial, “Better Business: Before seeking bankruptcy. Understand your options,” Randy Hutchinson, July 7, 2012

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