Collateral is when your property can be taken if you do not pay on a debt. It’s also commonly known as secured debt. The most common example of this is a house or a car. For example, if you don’t make your car payment the lender can repossess your vehicle.
If you do not make your mortgage payment, the lender can foreclose and take possession of your house. The most common example of “cross-collateralization” that we see in bankruptcy cases is most commonly employed by credit unions. People have a car loan and an unsecured credit card or personal loan with the credit union – the credit union will make you pay off the credit card or personal loan in order to obtain the title to your vehicle. Its usually up to the amount of equity in the car. For example, your car loan is for $15,000.
The value of your car is $20,000. You have a signature loan with the same creditor for $10,000. The creditor can make you pay $20,000 to obtain title to your vehicle. You always have the option to surrender your vehicle if you don’t want to pay the extra amount added onto the loan by your credit union. The good news is if you surrender your vehicle in the bankruptcy you owe nothing to the car company.
We always recommend having your checking and savings account and/or vehicle at a banking institution where you don’t have any credit lines. If you have any questions or need to make a decision about whether its better to keep your vehicle or pay the creditor we can assist in letting your know the pros and cons.
There is no minimum threshold amount of debt to be able to file for bankruptcy. My personal recommendation is that it’s probably not worth it for a debt amount under $5,000. If you have debt over $5,000, your minimum monthly payments are causing you a hardship, and you have been paying high interest and minimum payments with little, or no progress in reducing the principal amount of the debt you are a potentially good bankruptcy candidate.
There is no maximum amount of debt to file a Chapter 7, so that amount can be unlimited. If you have hundreds of thousands of dollars in debt, be assured that the trustee will ask how that money was spent. Some people have over hundred thousand dollars just in student loan debt alone. Even though there is no debt limit to file a Chapter 7, there are income requirements which should be addressed during your consultation. Our first analysis is whether you will qualify for a Chapter 7.
There are caps on debt in a Chapter 13 case which might seem illogical because you are actually paying your creditors, through the trustee for 36-60 months and in a Chapter 7 you are not making a monthly payment to the trustee. For a Chapter 13 you are permitted to have $465,275 in unsecured debt. Unsecured debt includes credit cards, personal loans, medical debt, and student loan debt.
You are allowed to have up to $1,395,875 in secured debt which would include items such as a home mortgage or financed vehicle.
If you have a debt that has been “charged off” this means that your original creditor has written your debt off their books. However, this DOES NOT mean that you are not responsible for the payment of the debt. Creditors often sell individual debts to third party collection companies whose business is debt collection. The collection company will first contact you in an attempt to collect the debt and if unsuccessful will take further actions such as filing a lawsuit and obtaining a judgment. After a judgment is entered, the creditor has the power to garnish wages, seize assets, or assert a lien against your property.
If you are uncertain whether or not an “old debt” is still valid, you should pull a credit report to obtain the date of your last payment to each creditor to determine whether the time has expired for the creditor to collect against the debt. If you are dealing with a creditor pursuing a debt that has been “charged off” or old debt and want to evaluate whether or not the debt is valid feel free to contact me to discuss your options.
Whether you are married or separated, you can still file for bankruptcy on your own. There is no requirement that your spouse file for bankruptcy.
Chapter 7 or Chapter 13 Bankruptcy?
If you are married and maintaining the same household, then the trustee will consider your joint income to determine if you are over the median income qualifications for a Chapter 7 bankruptcy or to determine what you are financially able to repay in a Chapter 13 bankruptcy.
If you are separated and maintaining separate households, you expenses should also be listed separately.
Contact Gina Rosato Law Firm, P.A. to discuss your Bankruptcy Options
Whether you are married or separated, you can still file for bankruptcy on your own. There is no requirement that your spouse file for 
