There are many conditions of bankruptcy — some well known and others not so well known. Here are some facts that we consistently find people are misinformed about, or simply do not know about.
If your car is included in a bankruptcy plan, it cannot be repossessed as long as you stay current on your payments — which are typically less than your previous car payment.
Back taxes owed to the IRS are also covered by bankruptcy. The IRS is a creditor just like everyone else, so they have to stop debt collection activities, including garnishments and levies. (Note: It often gets more complicated based on how long you have owed the money — which is why you should call us if you owe the IRS and are considering bankruptcy.)
Lenders are required to accept mortgage payments from people in bankruptcy. In fact, people sometimes file Chapter 13 bankruptcy in order to get lenders to accept their payments.
There is an order of priority that applies to who gets paid first in a bankruptcy settlement. Secured creditors are first in line and get paid first, then priority creditors and last, unsecured creditors. Unsecured creditors do not begin to receive payments until secured and priority creditors are paid in full.
During Chapter 13 bankruptcy, which last five years, your credit is frozen and you are not allowed to borrow money.
As you can see, bankruptcy is usually a complicated affair. If you’re considering bankruptcy, give us a call at (310) 882-7963. We can help you begin to sort out the best option for you.