If you are considering bankruptcy, you should be aware of all of the options that you have. Bankruptcy does not clear all debt, but Chapter 13 may provide more relief than Chapter 7. In either situation, bankruptcy should alleviate the bulk of your debt. We like to say that it gets rid of everything but the cockroaches (student loans, alimony, child support and recent taxes).
In a Chapter 7, you will also typically be required to pay for recently purchased items of $550 or more bought within 90 days of filing, fines or payments from government agencies, fraudulent debts, and cash advances of $825 or more within 70 days of filing. Your bankruptcy lawyer may be able to get those to be discharged or reduced significantly, too, though.
Chapter 7 vs. Chapter 13
Although there are other chapters, most individuals either file a Chapter 7 or Chapter 13 bankruptcy. The Chapter 7 is a straight bankruptcy; or otherwise known as “liquidation,” it is the simplest and quickest form of bankruptcy, it discharges most of your debts. The downfall of a Chapter 7 is that there are income limits, not all debts are discharged and a court ordered trustee gathers and sells your non-exempt property and uses the proceeds from the sale to pay your creditors off.
A Chapter 13 bankruptcy is typically referred to as a “wage earner bankruptcy” or “reorganization”. This type of bankruptcy includes a repayment plan for three to five years. Many Chapter 13 bankruptcies involve people who are dealing with mortgages and do not want to lose their homes or other properties. Through your payment plan, you can make up the payments you are behind on your mortgage, pay off your car, and pay off back taxes. In order to file a Chapter 13 and complete the plan successfully, you must have a stable income to be able to pay for the necessities of life like food, shelter, and utilities.
Get Legal Advice First
If you have questions about bankruptcy, contact a knowledgeable bankruptcy attorney. Our office would be happy to help answer your questions and work with you to ensure you have the representation you need.