WHAT ARE THE DIFFERENT TYPES OF BANKRUPTCY?
Most bankruptcy cases are filed under Chapter 7, Chapter 11, or Chapter 13 of the United States Bankruptcy Code. I handle primarily Chapter 7 and Chapter 13 bankruptcies. Each type of bankruptcy has different requirements, and depending on the situation, one might be more helpful than the other.
WHAT IS A CHAPTER 7 BANKRUPTCY?
A Chapter 7 bankruptcy is also called a “liquidation” bankruptcy. In a Chapter 7, the debtor seeks a release from all of his dischargeable debts. If the debtor receives a discharge, then the discharged creditors may not send bills or seek to collect on the discharged debt in any way. Some debts are not dischargeable, however, including most taxes, domestic support obligations, and debts obtained through fraud or malicious acts.
WHO CAN FILE FOR CHAPTER 7 BANKRUPTCY?
An individual or a business can file for Chapter 7 bankruptcy relief, but can only do so once every eight (8) years. In addition, because of changes to the bankruptcy laws in 2005, there are now income limitations that determine whether you can file a Chapter 7. This will depend on the median income in your state for your family size. When you meet me for a consultation, you should bring in your proof of income from the last six months so that I can determine whether you qualify for Chapter 7 bankruptcy relief.
WHAT IS A CHAPTER 13 BANKRUPTCY?
A Chapter 13 bankruptcy is a repayment plan bankruptcy. The debtor makes payments to the Chapter 13 Trustee, and the Trustee distributes the funds to creditors. In a Chapter 13 bankruptcy, the debtor pays according to his ability. Therefore a debtor in a Chapter 13 bankruptcy might repay some or all of his debts. You should consult with an attorney to determine whether a Chapter 13 bankruptcy is appropriate for you, and what your payment plan might look like.
WHO CAN FILE FOR CHAPTER 13 BANKRUPTCY?
Only individuals, not businesses, can file for Chapter 13 bankruptcy relief. There are also certain limitations on the amount of secured and unsecured debt that Chapter 13 debtors can have. (The debt limits are updated from time to time, and I can provide you with the current figures.)
WHEN IS A CHAPTER 13 BANKRUPTCY PREFERABLE TO A CHAPTER 7 BANKRUPTCY?
Sometimes a debtor qualifies for Chapter 7 bankruptcy relief, but would benefit from a Chapter 13 repayment plan. This might be the case when the debtor is behind on mortgage payments and wants to prevent foreclosure by paying his arrearages through the Chapter 13 plan. Chapter 13 could also be appropriate when the debtor has valuable assets that he wants to keep, or needs to repay non-dischargeable debt such as taxes or child support. These are issues you should discuss with an attorney.
WILL I LOSE MY PROPERTY IF I FILE FOR BANKRUPTCY?
The answer is, not necessarily. Some of your property may be subject to seizure in a Chapter 7 bankruptcy. Whether property can be seized depends on its value, whether the property is exempt from seizure by creditors, or whether the property is subject to a valid security interest. In a Chapter 13 bankruptcy, the amount of your plan payments might be determined, in part, by the value of assets that would have been subject to seizure in a Chapter 7. These are all issues that you should discuss with an attorney.
WHAT ABOUT MY LOAN MODIFICATION APPLICATION?
You can still file a loan modification application after filing for bankruptcy, or you can continue to work on an application you've already filed. If you applied for a loan modification and were not approved, and your mortgage company is now seeking to foreclose on your property, a Chapter 13 bankruptcy could still help stop the foreclosure process.
DOES MY SPOUSE HAVE TO FILE TOO?
No. Sometimes it makes more sense for both spouses to file bankruptcy, but you don't have to. We can discuss both options at your consultation.
CAN I DISCHARGE TAXES IN BANKRUPTCY?
It is possible to discharge certain tax debts in a bankruptcy. However, it depends on a number of factors, including what type of taxes you owe, when your tax return was due, when you filed your tax return, whether there is a tax lien, and whether you were (or could be) audited. Your attorney can help you obtain this information.