There are basically 5 types of bankruptcy cases that people can file. They fall under 4 chapters of the Bankruptcy Code found at Title 11 of the United States Code. In order to keep this discussion simple, we will only consider the three types that fall under Chapter 7 and Chapter 13 of the Code. If you are curious about the other Chapters, we will gladly answer your questions.

The following is a summary of the relief and benefits provided by them.

Chapter 7 is commonly referred to as “debt relief” or as “straight” bankruptcy. Neither of these are legal terms. With Chapter 7, all of your dischargeable debts are erased at the conclusion of the case, unless you have reaffirmed the obligation to a creditor and waived the discharge of that debt. There are just a few restrictions on who can seek a Chapter 7 discharge, but two terms you should become familiar with if considering Chapter 7 are “liquidation” and “means test”. At least in theory, in a Chapter 7 case your assets are liquidated and you are allowed to keep only the assets that are exempt or that the Chapter 7 trustee cannot liquidate. Therefore, if you have property that has significant value, or that you do not want liquidated, a Chapter 7 case is probably not for you.

When considering a Chapter 13 case, the following information is important, appropriate, and pertinent. Unlike cases filed under the other chapters, only individuals or married couples may file under this Chapter. Almost anyone with a regular source of income is eligible to file a case under this Chapter. It may be summarized as being a “personal reorganization” and can have either an extension plan or a composition plan of repayment. This depends on whether the plan’s propose is to pay the filer’s debts in full, or only the debts which are secured claims or with some other legal reason to be paid. Generally, there is no liquidation in a case under Chapter 13, but the “means test” does apply here.  A person who cannot pass under the “means test” analysis will have to propose a 60-month repayment, unless all of their debts are paid off in less time. A major benefit is that when unsecured debt, such as credit cards or medical bills, is paid under a Chapter 13 plan, the creditor receives no interest on the debt owed, no matter how long the plan lasts. Additionally, missed payments on mortgages and car loans are essentially administratively “brought current” and most car loan debts are paid through the Chapter 13 case. Most attorney fees owed by the debtor can be brought under Chapter 13.

If a person cannot file a Chapter 7 case due to concerns about a liquidation issue or the means test analysis, generally a Chapter 13 case is the best option.

At the present time, the filing fee for either a Chapter 13 or a Chapter 7 case is less than $350.00. It is substantially more for a case under the other chapters.

Please use the For Quick Query Reply feature or call us today to discuss your options.