Debtor Defense & Bankruptcy
Chapter 7 or Chapter 13?
The first decision you have to make is which kind of bankruptcy you should file for: Chapter 7 or Chapter 13? Chapter 7 bankruptcy is usually filed by persons with fewer assets and lots of unsecured debt. Homeowners who are trying to avoid foreclosure can file Chapter 13 bankruptcy to stop an action by their mortgage holder. It allows them to restructure their debt and keep their home.
There are some restrictions on who can file for bankruptcy protection in the United States. In order to be eligible, you must live, have a residence, piece of business or property in the country. You must take a means test to determine if you are eligible for Chapter 7 Bankruptcy or if you will have to file under Chapter 13. The means test, along with a requirement for credit counseling, was added to the bankruptcy process by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), For Chapter 7, you must not have been granted a discharge under Chapter 7 or completed a Chapter 13 repayment plan in the past 6 years. You also must not have had a bankruptcy filing dismissed for cause in the past 180 days. Requirements under Chapter 13 Bankruptcy require that you have a regular income, have less than $250,000 in unsecured debt and less than $750,000 in secured debt.
Chapter 7 Bankruptcy
For debtors seeking an opportunity to emerge out of a financial crisis and start afresh, then Chapter 7 of the Bankruptcy Code is the way to achieve this end relatively faster. Under Chapter 7 of the Bankruptcy Code all non-exempt property of the debtor is sold and the proceeds of the same are distributed to the creditors. In most cases where Chapter 7 is brought into force the debtor has no assets to lose, therefore the fresh start takes place relatively faster.
Also known as liquidation (converting assets into money) or a straight bankruptcy, Chapter 7 Bankruptcy is the most common form of bankruptcy filing. This type of bankruptcy filing accounts for as much as 65% of all Consumer Banking filings.
As mentioned before, this is one of the faster ways of starting afresh, and more so if there are no Objections from any of the parties’ involved. Ordinarily, most (if not all) debts would be discharged. within months of the attorney filing a bankruptcy petition. A trustee is appointed who collects all non-exempt property, sells the assets and distributes proceeds from this sale to appropriate creditors. Chapter 7 is different from other bankruptcy filings because the debtor needs not make a payment to the trustee. Even though in some cases this would mean that you will lose all your assets, this need not always be the case. Under Chapter 7 Bankruptcy, the debtor receives a discharge on all dischargeable debts. There are 19 general classes of debt that are discharged under Chapter 7 Bankruptcy;
For individuals, some property is exempt from liquidation, meaning that the trustee cannot take it away. The individual may choose between federal or state exemptions (each state has different exemption rules). We will help you make that choice, depending upon your particular situation. Some common exemptions include a homestead, a car, certain personal property, a certain amount of cash, etc. Most individuals are able to exempt most, if not all of their property, meaning they do not lose anything in the bankruptcy process.
An added advantage with Chapter 7 bankruptcy is that by signing a reaffirmation agreement a debtor can continue to pay for a car loan or a mortgage on their home. This agreement is in place because as per the US Government Bankruptcy Code a debtor could be allowed to retain some or all of his property.
Debtors engaged in business would usually not like the prospects of liquidation and Chapter 11 might be a better option for such individuals associated with corporations and partnerships. Also, individuals with regular income if in a debt situation would be better suited to file a Chapter 13 bankruptcy. Also, any person who has been granted a Chapter 7 discharge (or completed a Chapter 13 plan) within the last 8 years, cannot file for a Chapter 7 bankruptcy plan.
Chapter 13 Bankruptcy
When someone files for bankruptcy under Chapter 13 of the. Bankruptcy Code, their aim is to have the opportunity to repay some or all the debts in their name, in better terms, i.e. lower or no interest. Unlike Chapter 7 which involves liquidation of assets, this process involves. restructuring debts which allows the debtor to use whatever income they may have in the future to pay off the creditors. Filing Chapter 13 Bankruptcy is thus applicable fore debtor who has a regular income, and thus can afford to request for such adjustments or reductions. The United States Bankruptcy Code gives the debtor a ceiling of 5 years, within which the creditors must be paid back. The entire process is carried out under the supervision of the courts.
While debtors are allowed to keep all of their property, the court approves a new interest-free plan for repayment. A written plan is created giving details of all the transactions that will occur, and the duration of the same. The repayment must begin within thirty to forty-five days after the case has started. The transitory stage of paying a trustee who then pays a creditor, as in Chapter 7 Bankruptcy is usually eliminated with Chapter 13 Bankruptcy. Although, in some cases people may involve a trustee who would take care of disbursing money to the creditors as per the plan. Also, as per the law the creditors must strictly adhere the repayment plan approved by the court and are in fact prohibited to collect any claims from the debtor. We will prepare hew repayment plan to best suit your situation.
The most important criteria for a person to be able to file for Chapter 13 bankruptcy is that the individual must have a regular income:
Bankruptcy is not for everyone. Some individuals and businesses do not qualify; others prefer to settle their debts outside of the bankruptcy court. Whether it be negotiating the debt owed, or litigating the validity or amount of the debt in court, we can help you solve your debt problems.