Chapter 7 bankruptcy
Chapter 7 bankruptcy can be filed by individuals (called a “consumer” Chapter 7 bankruptcy) or businesses (called a “business” Chapter 7 bankruptcy). A chapter 7 bankruptcy typically lasts 4 to 6 months.
Property liquidation. In Chapter 7 bankruptcy, a trustee has the power to sell your property and pay down your debt. In return, most or all of your unsecured debt (that is, debts for which collateral has not been pledged) will be erased. You get to keep any property that is classified as exempt under the state or federal laws available to you. Many debtors who file for Chapter 7 bankruptcy are pleased to learn that all of their property is exempt, even their home. (The discussion regarding the sale of your property is not meant to invoke fear. In the 20 years of practice, I have never had a client whose property. If a property is in danger of being lost, a competent attorney would know that prior to filing of the bankruptcy. In other words, nothing should occur by surprise.)
Secured debt. If you owe money on a secured debt (for example, a car loan for which the car is pledged as a guarantee of payment), you have a choice of allowing the creditor to repossess the property; continuing your payments on the property under the contract; or paying the creditor a lump sum amount equal to the current replacement value of the property. Some types of secured debt can be eliminated in know you know him Chapter 7 bankruptcy.
Eligibility for Chapter 7. Not everyone can file for Chapter 7 bankruptcy. For example, if your disposable income is sufficient to fund a chapter 13 we payment plan– after subtracting certain allowed expenses and monthly payments for certain debts– you won’t be allowed to use chapter 7 bankruptcy.
Bankruptcy doesn’t work on some kind of debts. Though bankruptcy can eliminate many kinds of debts, such as credit card debt, medical bills, and unsecured loans, there are many types of debts, including child support and spousal support obligations and most tax debt, which cannot be discharge is in Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
The chapter 13 bankruptcy is also known as a “wage earner” bankruptcy because, in order to file for chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt.
Repayment. When you file for chapter 13 bankruptcy, you must propose a week payment plan that details how you are going to pay back your debts over the next 3 to 5 years. The minimum amount you’ll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you’d file a chapter 7 bankruptcy.
Debt limits. Your debts must be within limits set by the federal government: currently, you may not have more than 1,010,650.00 in secured debt and $336,900 in unsecured debt.
Secured debt. If you have secured debts, Chapter 13 gives you an option to make up missed payments to avoid repossession or foreclosure. You can include these past due amounts in your payment plan and make them up over time.
Other types of reorganization bankruptcy
If the amount of your debt is higher than the amount set by the federal government for a chapter 13, you may be obligated to file a Chapter 11 bankruptcy.