Types of Personal Bankruptcy

Chapter 7: Total Liquidation Bankruptcy

Primary Purpose: Discharge of all permissible debts without any repayment plan.

Although commonly believed to be a total liquidation or disposal of any-and-all non-exempt assets, this may not however be the case. Typically under new chapter 7 bankruptcy laws, petitioners do not posses significant non-exempt assets that a bankruptcy trustee would otherwise sell to satisfy outstanding debts.

If a Chapter 7 bankruptcy petitioner can clearly prove their inability to meet the continuing financial debts included within the bankruptcy petition, a repayment plan would not be needed.

Eligibility Requirements:

  • Must not have filed any bankruptcy petition within the past 180 days.
  • Must have completed compulsory credit counseling 180 days before filing a bankruptcy.
  • Must satisfactorily complete the "Means Test".
  • Must present Statement of Financial & Schedules: These are the schedules, which include a list of the amounts owed to each creditor, petitioner(s) income verification, itemized monthly living expenses (in detail).
  • Schedule of Exempt Property: Property protected under federal statutes from seizure.
  • Must have filed all required income tax returns.

Timeframe:

Meeting of Creditors: 6 weeks after filing.

Discharge of Allowable Debts: 90 days after the meeting of creditors.

Entire process should be completed within 120-150 days from the date of filing, provided none of the creditors contest (adversarial case) your claims.

Bankruptcy Fees:

Filing fee $299

Administrative fee $39

Trustee Surcharge $15

Fees are waived if:

The petitioner's income proves to be less than 150% of the poverty level, and they are unable to make installment payments. Installment plans allow a maximum of four payments, with the final payment due within 120 days after the bankruptcy petition. If the fees are not paid, or a waiver is not granted, your bankruptcy petition will be automatically dismissed.

Above fees are statutory court cost, and do not include credit counseling or attorneys fees.

Chapter 13: Reorganization & Repayment of Debts Bankruptcy

Primary Purpose: A bankruptcy repayment plan for petitioners exceeding the maximum

income guidelines for a Chapter 7 bankruptcy petition.

chapter 13 bankruptcy laws also apply to people voluntarily electing to repay their debts, and thereby potentially avoiding a liquidation of assets to satisfy outstanding debts. Payment plans typically range from 3 . 5 years. Note: The Bankruptcy Trustee has the final say in how much money you will be required to pay your creditors each month. The Means Test will be used to decide (based on the bankruptcy code standard) your available income. The other financial schedules presented with your petition outlines in detail your debts. The Trustee will review this information and decide how much they think you can afford to pay your creditors each month.

Many Chapter 13 bankruptcy petitioners have had their bankruptcy cases dismissed, because they suggested the monthly payments imposed by the Trustee, exceeded what they were paying before filing for bankruptcy. In other words, the bankruptcy was more expensive each month, and they simply could not uphold the bankruptcy payments.

Although a Chapter 13 bankruptcy allows you to set up a repayment plan if the payments are missed, your case is dismissed. If your case is dismissed, your creditors are free to seize your property, garnish your paycheck, and continue with other remedies allowed by chapter 13 law.

The catch 22 which you must be aware of is once you have an open bankruptcy case, you must wait 10 years before you can file another bankruptcy. For homeowners wishing to keep their homes, a Chapter 13 bankruptcy may prevent foreclosure. Petitioners may keep all property in which they can afford to uphold the payments. All other assets will be liquidated (excluding the allowed exemptions) to satisfy creditors.

Eligibility Requirements:

  • Must not have filed any bankruptcy petition within the past 180 days.
  • Must have completed compulsory credit counseling 180 days before filing a bankruptcy.
  • Must satisfactorily complete the "Means Test".
  • Must present Statement of Financial & Schedules: These are the schedules, which include a list of the amounts owed to each creditor, petitioner(s) income verification, itemized monthly living expenses (in detail).
  • Schedule of Exempt Property: Property protected under federal statutes from seizure.
  • Must have filed all required income tax returns.
  • Must present a repayment plan, which must be approved by the Bankruptcy Trustee and the creditors included in the bankruptcy.
  • Must be able to meet the financial requirements of the repayment plan.
  • $1,000,000 limit on secured debts.
  • $337,000 limit on unsecured debts.

 

Chapter 13 bankruptcy unlike a Chapter 7 bankruptcy does protect cosigners on some types of debts. In a Chapter 7 bankruptcy cosigners may have legal action taken against them, outside of legal action taken against the bankruptcy petitioner. Chapter 13 bankruptcy protects cosigners if the bankruptcy petitioner upholds the agreed upon payment arrangement.

Timeframe:

All required financial schedules due within 15 days of filing petition.

Meeting of Creditors: 6 weeks after filing.

Discharge of Allowable Debts: Up to 5 years after the meeting of creditors.

Entire process should be completed within 3-5 years from the date of filing, provided none ofthe creditors contest your claims, and the length of your repayment schedule. The repayment schedule could be shorter than 3 years provided you have the ability to pay off debts sooner.

Bankruptcy Fees:

  • Filing fee $274
  • Administrative fee $39
  • Trustee Surcharge $15
  • Amendment Fee $26 per amendment

Above fees are statutory court cost, and do not include credit counseling or attorneys fees.

Certain types of personal property are exempt from creditors in both Chapter 7 and Chapter 13 bankruptcy cases. Exempt property limits vary from state to state. You should consult with a bankruptcy attorney in your state to find out which assets may qualify for exemption against creditors.

<<Part 1: Introduction to BAPCPA | Part 3: The Means Test>>

 

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