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Edmonds Bankruptcy Law Blog

Chapter 13 payment plan may help consumers to keep their home

Chapter 13 in the state of Washington and elsewhere is the bankruptcy program that provides for a monthly payment plan for an individual or married couple to catch up on their debts over a specified period. It is well-suited to consumer debtors who have sufficient income to fund a payment plan. Chapter 13 is also a valuable tool for those who want to keep their home despite having fallen behind in the payments.

There are certain qualifications that must be met to file a Chapter 13. It is only open to individuals and married couples, and not to business entities. However, a sole proprietor or partner in a business can file with respect to debts owed personally, which may include debts associated with the business. Prior recent bankruptcies in which a discharge was granted can bar someone from filing a Chapter 13. The details on this restriction and others mentioned can be obtained in a consultation with an experienced consumer bankruptcy attorney.

Chapter 7 bankruptcy does not need to carry any surprises

When an individual or married couple residing in the state of Washington are contemplating filing a Chapter 7 bankruptcy, they usually have many questions about important issues that will affect their lives. The best place for answers is in the office of an experienced consumer bankruptcy attorney. The initial consultation is usually free and the bankruptcy attorney is in effect at the consumers' disposal to answer all their questions.

Because Chapter 7 is the liquidation chapter of the Bankruptcy Code, people often ask if they will lose their property, their cars or their home. The answer is usually no. If such a result was indicated, the attorney will recommend a Chapter 13. In most cases, however, the consumer filers can keep their vehicles, their personal belongings, furnishings and, importantly, their house.

Bankruptcy can help to regain financial stability

Washington consumers who are overwhelmed by debt might be exploring the options to get back on track. Many people will try all kinds of quick-fixes rather than filing for bankruptcy. However, most of those only cause further spiraling into debt, while bankruptcy can be a remedy. Gaining knowledge about the two options -- Chapter 7 and Chapter 13 -- may be the first step to regaining financial stability.

Individuals who do not own a home and have limited incomes typically find Chapter 7 bankruptcy to be the suitable option. If the court approves such a filing, unsecured debts such as credit cards and medical debt can be wiped out within months. However, the court will have the right to sell some of the consumer's property to cover debts, but certain personal items are typically exempted from liquidation.

Chapter 13 can stop foreclosure and provide for monthly payments

The main legal vehicle used in the state of Washington and elsewhere to stop a foreclosure and attempt to save one's home is a Chapter 13 bankruptcy. This is a payment plan that allows the homeowner to make monthly payments on the past arrearages and to resume regular mortgage payments at the same time. Even for a property in foreclosure and scheduled for a sheriff's sale, the owners, if qualified, can file a Chapter 13 and stop the sale from taking place.

The foregoing scenario, however, demands the assistance of an experienced professional. When a foreclosure is filed against a homeowner, an appointment to meet with a consumer bankruptcy attorney will likely be the most prudent first move. Only in that setting will an individual or married couple have the best chance of learning the full facts regarding the options and strategies available. If qualified, a Chapter 13 will be filed to stop the foreclosure proceedings in its tracks.

Here's how to manage credit card debt

Many Washington residents struggle with high levels of debt. For some, the total amount owed comes as something of a shock. Relying on credit cards to get through financial shortfalls, or simply paying the minimum amount owed for many years can result in a staggering volume of credit card debt. Here are some tips for effectively managing that debt load. 

One place to begin is by negotiating directly with credit card companies to explore available debt management options. Some companies will offer lower interest rates, extended grace periods or even overhauled repayment terms. Reaching out to a credit card company may seem intimidating, but the card issuer has a vested interest in finding a way for consumers to repay their debts, so they are often more than willing to help find a creative solution. 

Bankruptcy may allow for keeping home while erasing other debt

There are many reasons why people in Washington and other states file for personal bankruptcy relief. Their debt problem may be due to catastrophic medical debt, unemployment, disability or massive credit card debt caused by divorce and/or any of the foregoing problems. They may also be so overwhelmed with student loan debt that they seek bankruptcy relief to eliminate their unsecured debt and thus free up their budget to make student loan payments.

Consumer bankruptcy attorneys universally report that their clients are hard-working individuals and married couples who are used to always paying their debt on time. They come from good credit, bill-paying backgrounds. They are acting in good faith and in dire need of relief to put the raging fires of runaway debt out permanently.

Bankruptcy effect on credit score can be repaired after discharge

Bankruptcy in the state of Washington is a remedy that helps individuals and married couples to obtain substantial debt relief from overwhelming unsecured debt. The action has other purposes, as when a Chapter 13 proceeding is used to try and save the filer's residence and/or other property. In order to determine qualifications for filing bankruptcy and the choice of remedies, it is best to obtain a consultation with an experienced consumer bankruptcy attorney. The initial consultation is usually free.

Understanding the impact on one's credit score will be a prime issue to also discuss with  the bankruptcy attorney at that initial consultation. Where the individual or married couple have already amassed a long chain of bad accounts, late payments, charge-offs and the like, the impact of the bankruptcy will not greatly change one's credit score. For those with good credit when they file, the credit score may take a steep dive downward.

Attorneys find several defenses to stop foreclosure actions

Consumer bankruptcy attorneys in the state of Washington are experienced in representing homeowners in mortgage foreclosure proceedings. Many different defenses can be asserted to stop foreclosure proceedings on a temporary and sometimes permanent basis. This can be done in the state courts right after the foreclosure is first filed, or it can be done in a  bankruptcy court if appropriate under the circumstances.

During the real estate and financial crisis, the federal government passed various regulations and laws protecting homeowners from mortgage lenders taking advantage of the vast numbers of people who had fallen behind in their payments. Perhaps the best known program was the Home Affordable Modification Program, known as HAMP. This was a project to get lenders to modify qualified mortgages by making the terms more affordable for the borrowers.

Efforts continue for student loan debt relief in bankruptcy

In Washington state and nationwide, student loan debt remains a critical problem to a significant percentage of the population. Debt relief measures, including bankruptcy, have not been effective in alleviating the seriousness of the problem. Bankruptcy at one time was an effective tool in reducing student loan debts for filers, but that relief was all but stopped when the current bankruptcy laws underwent revisions that required "undue hardship" be proved before a student loan could be discharged in a bankruptcy.

The bankruptcy courts have unfortunately interpreted "undue hardship" in a very narrow sense, requiring that the hardship be nearly permanent and of a devastating nature. However, some courts have been willing to discharge part or all of the individual's student loan debt on a more liberal interpretation of the undue hardship standard. The myth that there is no discharge of student loans at all in a bankruptcy is therefore more rumor than fact.

Bankruptcy does not mandate bad credit for years to come

A bankruptcy discharge in Washington state is a great relief to persons who have been struggling with overwhelming unsecured debt pressures for years. The debt is erased, a new start is assured, and the stifling, fear-generating calls from bill collectors are banished. The only drawback that some people fear is the difficulty in getting credit in the future with a bankruptcy on one's credit report.

Chapter 7 is an obstacle that may stay on the credit report for up to 10 years, but the truth is that, in most cases, it does not take that long to shed the item from the report. If the person focuses on the goal of cleaning up his or her record, re-establishing a good payment history, and doing everything on time and according to certain guidelines, success can be achieved within a few short years. The beauty of the credit report and score is that one's record is dynamic; it never stays stagnant. Anything the person can do to show making new strides for financial security is going to go on that record and increase the score going forward.