Bankruptcy – All You Need to Know

Personal Bankruptcy

In a nutshell, most individuals and married couples have two types of bankruptcy under the Bankruptcy Code: Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.  While you can receive a bankruptcy discharge and thus eliminate your debts by filing either chapter, Chapter 7 and Chapter 13 function very differently.

Types of Bankruptcy: Chapter 7

Chapter 7 is intended for those looking for a fresh start. It’s often referred to as “liquidation” bankruptcy — meaning that you must be prepared to give up any assets that you can’t protect by your jurisdiction’s bankruptcy exemptions to get a clean slate of your debts.  Below is a checklist of needed information for Chapter 7. For more detailed information on any of the checklist items, please click the highlighted links.

• Must file an accurately completed Chapter 7 Bankruptcy Petition with your jurisdiction’s Bankruptcy Court
• Must pay Court’s Chapter 7 Filing Fee : $299
• Must complete Credit Counseling with an approved agency (For a list of all approved agencies in your state, see www.usdoj.gov/ust and select “Credit Counseling and Debtor Education.”)
• Case is administered by an assigned Bankruptcy Trustee. Must attend a Trustee supervised Meeting of the Creditors about a month after your case is filed.
• Typically takes 4-6 months from time of filing to complete and receive a discharge
• Student Loans, parking tickets and debts ordered to be paid via a divorce decree are NON-dischargeable(can’t be eliminated in a Chapter 7)
• Can only successfully file Chapter 7 ONCE EVERY 8 YEARS
• Bankruptcy Attorney Fees:  Usually $500 – $2500 (or higher if your case is highly complex) depending on where you live.
• Must meet income requirements and pass the Bankruptcy Court’s Means Test to qualify for Chapter 7.  Those who don’t qualify based on income must file Chapter 13.

Types of Bankruptcy: Chapter 13

Chapter 13 is commonly referred to as the “reorganization” bankruptcy.  It’s filed for many reasons – most commonly to save a home from foreclosure, stop IRS collection or to consolidate debts into a single monthly affordable payment.  Below is a checklist of needed information for Chapter 13. For more detailed information on any of the checklist items, please click the highlighted links.

• Must file an accurately completed Chapter 13 Bankruptcy Petition and Chapter 13 Plan with your jurisdiction’s Bankruptcy Court
• Must pay Court’s Chapter 13 Filing Fee : $274
• Must complete Credit Counseling with an approved agency (For a list of all approved agencies in your state, see www.usdoj.gov/ust and select “Credit Counseling and Debtor Education.”)
• Case is administered by an assigned Bankruptcy Trustee. Must attend a Trustee supervised Meeting of the Creditors about a month after your case is filed.
• Chapter 13 repayment plans typically must last 5 years(60 months) from time of filing to receive a discharge
• Student Loans, parking tickets and other non-dischargeable debts can be included in the repayment plan
• No limit of amount of times you can file Chapter 13, though most Courts discourage repetitive filings within a short period of time
• Bankruptcy Attorney fees:  Usually $1500 – $3500 (or higher if your case is highly complex) depending on where you live.  The majority of the attorney fees are typically included in the monthly consolidated Chapter 13 payment.
• Must meet monthly income requirements to qualify for Chapter 13. Sources of income can include: employment, social security, pensions, and child support among others.

Causes of Bankruptcy

There are many different life situations that result in people filing personal bankruptcies. Some of them are:

• Insurmountable medical debt
• Excess credit card use
• Mismanagement of expenses relative to an individual’s monthly income
• And many more…