If you find yourself overwhelmed by debt from factors that seem beyond your control – medical bills, unemployment, business failure, identity theft or divorce – bankruptcy can seem like the only way to get a fresh start.
People file for bankruptcy for a number of reasons. You may want to stop wage garnishments, prevent creditor collections, end creditor phone calls, stop or delay foreclosures or evictions, or prevent utilities from being shut off.
Whatever the reason, KEOSIAN LAW LLP realizes this is not an easy or pleasant decision. Our attorneys will listen to your needs, guide you through the process and make sure you understand all of your options. If you choose to file for bankruptcy, KEOSIAN LAW LLP can help you file and obtain relief from your debts. If bankruptcy is not right for you, we can help you pursue other approaches, including debt forgiveness, debt elimination and other suitable alternatives.
Chapter 7 bankruptcy—also called “straight” or “liquidation” bankruptcy—is designed to give you a fresh start by wiping out many types of debt. In return, the bankruptcy trustee sells (liquidates) your nonexempt property to provide partial repayment to creditors. Many people have very little nonexempt property, so most Chapter 7 bankruptcy filers end up keeping most or all of their property.
A debtor is someone who owes money for an outstanding debt. “Debtor” is also the term used to describe someone who files for bankruptcy relief. A debtor can be an individual or company. By contrast, the “creditor” is the person or business to which the debtor owes money, and a “codebtor” is responsible for a debt along with you. For instance, if your aunt cosigned your loan (signed a contract agreeing to pay for the car if you didn’t), your aunt would be the codebtor on the loan. As codebtors, you’d both be responsible for paying off the obligation.
In Chapter 7, the debtor’s household income must be low enough to qualify. Suppose the household income is below the state median income for similar households. In that case, the debtor presumptively qualifies for Chapter 7, although the judge can still require filing under Chapter 13 if the debtor has sufficient income to fund a Chapter 13 plan. If the debtor’s income is higher than the median, the rules then look at the debtor’s means. If, after considering certain expenses and debt payments, enough income exists to fund a repayment plan, the debtor will qualify.
Chapter 7 bankruptcy wipes out most types of unsecured debt. Unsecured debts are debts that aren’t guaranteed by collateral property. (A mortgage is a secured debt guaranteed by the home; an auto loan is a secured debt guaranteed by a vehicle.) Unsecured debts wiped out by Chapter 7 bankruptcy include credit card debt, medical bills, and gasoline card debt. However, you can’t wipe out all unsecured debt. For instance, child and spousal support and student loans (except in limited circumstances) are nondischargeable—you’ll remain responsible for repaying them after bankruptcy. Some other debts might not be dischargeable if the creditor objects, such as recent debts for luxury goods, debts incurred based on fraud (such as lying on a credit application or writing a bad check), and tax debts first due within the previous three years.
Chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts to creditors. Debtors generally propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. During this time the law forbids creditors from starting or continuing collection efforts.
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
Basics: Discharge most types of unsecured debt. The trustee will try to sell any significant nonexempt property in order to repay your creditors.
Basics: You repay your creditors (some in full, some in part) through a Chapter 13 Repayment Plan.
Time Frame: Typically, three to four months to complete.
Time Frame: Lasts three or five years (depending on your income). At the end, most of your unsecured debt balances will be discharged.
Property: Many Chapter 7 debtors keep all or most of their property. Petitioners with significant equity or assets that are not exempt by law could lose them to satisfy some debts.
Property: No property is liquidated under a Chapter 13 bankruptcy.
Your Income: Some high-income earners won’t be eligible for Chapter 7.
Your Income: Chapter 13 requires a regular income for the monthly payment.
Homeowners/Foreclosures: Can temporarily stop foreclosure, but unless you can get current on your mortgage, the foreclosure will eventually continue.
Homeowners/Foreclosures: Can stop a foreclosure and you can make up past due mortgage payments through your repayment plan.
Eligibility: Available to those whose income is less than the median of their state, or those who can pass the means test.
Eligibility: Has no income requirement, but unsecured debt must be below $419,275 and secured debt below $1,257,850.
For many debtors, Chapter 13 bankruptcy is a good option. It has provisions that will allow an individual with regular income to repay some creditors less than the amount owed while keeping all assets, including houses and cars. But not everyone is eligible. Contact the experienced Bankruptcy attorneys at Keosian Law LLP at (877) 554-2226 to determine who can and cannot file this bankruptcy type.
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