COMMON QUESTIONS RELATED TO BANKRUPTCY

There are two types of bankruptcies, Chapter 7 and Chapter 13. Featured are some common questions related to both. We can teach you alternatives that will help you avoid filing bankruptcy.

What does Chapter 7 Bankruptcy mean?
Also known as 'liquidation'. This type of bankruptcy will wipe-out, or discharge all of your unsecured debts. Chapter 7 is known as liquidation because any of your non-exempt assets can be sold (hence liquidated) by the trustee for the advantage of your creditors. Most Chapter 7 debtors have no non-exempt assets. Therefore no liquidation, and unsecured debts are merely discharged. It is important to note that there are specific unsecured debts that can not be discharged in Chapter 7 bankruptcy.

It is important to note that there are certain debts that are non-dischargeable when you file bankruptcy.

How do I qualify for filing a Chapter 7 Bankruptcy?
In order to file a Chapter 7 BK, you have to qualify under the Chapter 7 means test. The means test will first compare your income with your state's median income. In the event that your income is lower than your state's median income, you are eligible to file for Chapter 7 bankruptcy. On the contrary, if you earn more than you state's median income, additional computations related to your income and permitable expenses are needed to determine if you are eligible for filing Chapter 7 bankruptcy.

How do I qualify for filing a Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a partial or full repayment plan developed by the BK courts. A debtor will develop a plan for approval and, when approval for the plan is granted, they will remit monthly payments to their bankruptcy trustee. In turn, the trustee makes payments to the creditors in agreement to the terms of the plan. The typical repayment time frame ranges from 3-5 years. At the conclusion of the repayment period, as long as all payments have been made according to the plan, the outstanding unsecured, dischargeable debt can be discharged.

Who is Able to File Chapter 13 Bankruptcy?
For the simple fact that there is no means test, it is usually simpler to qualify for Chapter 13 bankruptcy than for Chapter 7 bankruptcy. In addition, some debtors who are not eligible for Chapter 7 bankruptcy select to under Chapter 13. However, under Chapter 13 you are going to be required to earn a steady income so that you can create a budget and remit reliable payments to your trustee.

Which type of Bankruptcy is Better?
It will depend on your specific situation. If you have a great deal of unsecured debts, like doctor bills or credit card debts, then Chapter 7 is better for you. Chapter 7 is also better for you if you don't own much property, you have a low income and the majority of your debts are unsecured. If you have a regular income and non-exempt property that you would like to hold on to, then a Chapter 13 bankruptcy if your best option.

We suggest that you contact a local bankruptcy attorney and discuss your situation. Or you can read more about how to file bankruptcy on your own.

Filing Bankruptcy
Is Bankruptcy Good or Bad?
Automatic Stays
Importance of Credit After Bankruptcy



 


 

 

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