During these economically difficult times, many individuals and families may be seriously considering filing a Chapter 7 or Chapter 13 Bankruptcy Petition. Law22 understands that this is an extremely difficult decision with important implications. That is why the attorneys at Law22 insist on conducting a comprehensive evaluation of their client’s financial situation, before offering any recommendations on whether or not Bankruptcy is the best option.
Here is some helpful information to keep in mind if you are considering filing for Bankruptcy protection. In most cases, individuals and/or couples are faced with the question of whether to file Chapter 7 or Chapter 13 Bankruptcy. There are advantages and disadvantages to both and many individuals do not have the option of choosing which petition to file.
A Chapter 7 Bankruptcy, otherwise known as total liquidation, virtually erases all unsecured debts incurred by a person with the exception of student loans, government debt, child support debt, and a number of other debts. The obvious debts expunged (or removed entirely) by a Chapter 7 filing include credit card debt, health care debt, and other common consumer debts. Among other things, in order to qualify for this Chapter, the debtor’s household income needs to be below their state’s median income. If their income exceeds the state’s median, then the debtor has to demonstrate that his/her expenses exceed his/her income, or in other words do not allow him to make any payments towards his unsecured debts. In general individuals filing under this chapter can keep their house, a car, and other personal assets worth up to a certain value.
Individuals who earn above the state’s median, or have assets worth more than what is allowed under Chapter 7, generally choose to file a Chapter 13 Bankruptcy. Although the mechanics of this filing may be complicated, the basic idea is that the debtor’s debt is put into a plan under which the debtor makes monthly payments for a period of three or five years, at the end of that period, the debtor’s unsecured debt gets discharged. Besides allowing debtors to keep all of their assets, another benefit of filing a Chapter 13 is that, in many situations, it rids the debtor of the second mortgage debt on his or her property.
For further information, see the following Law22 blogs: