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Other FAQs | Asheville, NC

How Will Bankruptcy Affect Someone Who Cosigned a Loan with Me?


Another person who is jointly liable with you on a debt is known as a "co-debtor". When you file bankruptcy, the co-debtor remains liable on the debt, unless the co-debtor is your spouse and you file a joint petition. If the co-debtor fails to maintain the payments on the debt, the failure to pay the debt will adversely affect his or her credit. In a Chapter 7 case, the creditor is free to pursue collection from the co-debtor immediately. In a Chapter 13 case, the creditor may be prevented from collecting from the co-debtor during the term of the Chapter 13 Plan. If you file aChapter 13 and the status of a co-debtor is important to you, you will need to discuss the circumstances of the debt in order to determine the likely impact on the co-debtor. It may be possible to put the debt in a special class to be paid in full to protect the co-debtor from collection activities.

What Should I Do if I Owe Money to my Bank or Credit Union?


If the bank or credit union at which you have checking or savings accounts is also a creditor (you have a loan, credit card account, or overdraft protection with the bank), then it is possible that the bank will put an "administrative freeze" on the funds in the account on the date the bankruptcy petition is filed. Such an administrative freeze will cause checks that have not cleared the bank to bounce. Therefore, you may want to open a new bank account with a bank where you do not owe any money prior to filing bankruptcy and cease checking activity in the old account several weeks prior to filing the petition. It is not necessary that you close the old account, but you may want to remove all but a few dollars from the account.

If your paycheck is automatically deposited to the account, you do not necessarily have to change the deposit. Funds that are deposited into the account after you file the bankruptcy cannot be frozen.

Should I File Chapter 13 or Chapter 7?


You must ultimately decide for yourself whether filing bankruptcy is the proper action to take, and if so, which Chapter is better for you.

Here are some factors to consider:

  1. If you are not making more money than you need for your current living expenses, Chapter 13 is not a realistic option.
  2. Chapter 7 has the advantage of wiping the slate clean and enabling you to embark on your "fresh start" immediately, whereas with Chapter 13 you will be making payments for some period of time.
  3. If you have a particular asset that is above the allowable exemption that you want to keep, then Chapter 13 may be the only alternative. For example, if you are single, own a residence with over $35,000.00 in equity and don't want to have it sold, Chapter 7 is not right for you.
  4. If you are trying to ward off a repossession or a foreclosure, Chapter 13 may be the only way to do so.
  5. Fees are generally higher to file a Chapter 13; the standard fee is $3,900.00. The standard fees for the normalChapter 7 are $1,500.00-$2,500.00. However, the entire fee must generally be paid in advance in Chapter 7 cases. In Chapter 13 cases, most if not all of the fee is paid through your Chapter 13 plan. For more on fees, see ourOverview of Bankruptcy Costs.
  6. In certain circumstances, Chapter 13 is more advantageous because it allows you to keep secured property, such as houses and vehicles, by paying less. The three most prevalent circumstances are:
    1. If the retail replacement value of a vehicle is less than the amount of the debt and the claim is not a 910-vehicle claim, you can keep the vehicle by paying that value rather than the full amount of the debt.
    2. On some secured debts, if the interest rate is high, you can reduce the interest rate.
    3. If you have more than two mortgages on your residence, and the value of the residence is less than the amount owed on the first mortgage, you can "strip-off" the second mortgage and treat it as an unsecured claim. For example, if your residence is worth $220,000.00 and it is encumbered by a first mortgage with a balance of $225,000.00 and a second mortgage with a balance of $25,000.00, you can strip off the second mortgage.

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Westall, Gray & Connolly, P.A.

 wgcd@wgcdlaw.com
 81 Central Ave, Asheville, NC 28801
 Office - (828) 254-6315
 Fax - (828) 255-0305

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