Chapter 7 vs. Chapter 13 Bankruptcy
You may have heard there are different bankruptcy chapters yet don’t know much more. What bankruptcy chapter applies to you? Do you have a choice between bankruptcy chapters? What property can you exempt and protect during bankruptcy? It is always best to discuss your specific circumstances with an attorney.
However, here are some basic eligibility factors for filing a Chapter 7 versus a Chapter 13 bankruptcy.
· Above established annual median income for your household size
· Purpose is restructuring a repayment of certain debts
· Fell behind on mortgage and need to save an asset from going into default!
· Stop foreclosure
· Some items that are non-dischargeable in a chapter 7 may be dischargeable in a chapter 13
· Below established annual median income for your household size
· Current on loans for secured debts
· Purpose of bankruptcy is to discharge debts not restructure a repayment
· Qualifying debts are primarily dischargeable
· Tool to discharge amounts you are personally responsible for after a vehicle(s) is repossessed
Chapter 7 bankruptcies are generally thought of as a liquidation of debts. In other words, your dischargeable debts are discharged if you successfully complete your chapter 7 bankruptcy, unless you have non-exempt assets that can be liquidated. They are a relatively short process, generally, and can truly help you get back on your feet after life happens.
Chapter 13 bankruptcies are a 3-5-year repayment plan. They come fully loaded with many tools that can help families get back on their feet. For example, a chapter 13 bankruptcy can be a powerful tool to save your home by allowing you to make the ongoing payments as well as prorated payments to cure a delinquency amount due. Also, debts that are otherwise non-dischargeable may be dischargeable in a chapter 13.
Nevertheless, in most instances the chapter that applies to you is not a choice and rather is based on what you qualify for. Unfortunately, there are also circumstances where based on your income a debtor(s) only qualifies for a chapter 13, which is not a good fit. Under limited circumstances, debtor(s) may have a choice between filing under a chapter 7 or 13 and the decision may be based on a debtor(s)’ particular goals for filing bankruptcy in the first place.
· Credit card debt
· Medical debt
· Money/Lawsuit Judgments against you
· Promissory notes or other personal obligations to pay secured debts
· Personal loans (i.e. unsecured debts)
· Most debts arising from a car accident
· If not explicitly non-dischargeable, the debt is likely dischargeable
· Some debts that are non-dischargeable under a Chapter 7 are dischargeable in a Chapter 13
Which Debts are Dischargeable and Non-Dischargeable?
· Student Loans (generally)
· IRS Taxes and most tax debts
· Fines, Restitution or Penalties for breaking the law
· Government fines or traffic tickets
· Child support / Spousal maintenance
· Loans taken out within 90 days of filing
· Debts arising from fraud, or willful or malicious acts
· Debts arising from embezzlement, larceny, or a breach of fiduciary duty
· Debts or creditors not included in your bankruptcy petition
What Will Your Experience be Like at Evergreen?
Life happens and a bankruptcy might be the smartest way for you to bounce back and obtain a fresh start. But truth be told, a bankruptcy may not be the best option! If it isn’t, I’ll be honest with you and hopefully suggest better alternatives. For example, if you’re thinking about bankruptcy because you’re facing foreclosure, or due to a single debt, or due to another isolated circumstance—bankruptcy may be one of several options available to you. I have worked for lenders and debtors and I focus on chapter 7 and 13 bankruptcies because that is what the average person needs. I also have experience in other areas of the law and work with a team that is fully loaded with experience. Evergreen is sure to fully satisfy your unique needs.
Let’s sit down and talk about what’s going on and hopefully just meeting and starting the process will relieve some stress.
Our Process at Evergreen:
Here at Evergreen, we are constantly working to improve our processes and client experience. In an effort to utilize technology, we make the process as efficient and convenient as possible for you by allowing you to electronically make payments, sign engagement letters, and even complete our client questionnaire online that is needed to prepare your actual bankruptcy petition. Don’t use computers? That’s okay, we have paper copies too.