78% of cases
Pay nothing back
Discharge in 3 months
Could lose assets 10 years on credit report
Wait 2 yrs for a mortgage
* Other nuances
20% of cases
Pay some debt back 3 yrs or 5 yrs
Will not lose assets
Rewrite loan terms
7 years on credit report
< 2 yrs to get a mortgage
* Other nuances
CHAPTER 7 BANKRUPTCY
Chapter 7 is a liquidation bankruptcy option for those with a limited income. By filing for Chapter 7, you may be able to liquidate, or eliminate, certain types of unsecured debt such as credit card balances, loan payments, or medical bills. You will not be able discharge debts such as child support, spousal support, tax debt, or student loans.
In order to liquidate your debt, many, if not most, of your non-exempt possessions are relinquished to a trustee who will sell them and distribute the funds to your creditors. Non-exempt property can include personal belongings, clothing, jewelry, valuable collector items, artwork, investments, property that is not your primary home, and more. There are items of personal property that are considered exempt from liquidation, but at a limited value and dependent upon state or federal exemption laws. Examples of potential property exemptions can include homestead, family pictures or keepsakes, medically prescribed heath aids, compensation or restitution from personal injury or wrongful death, life insurance proceeds, and more.
In some cases, unsecured debt remaining after liquidation is discharged, however secured debts including student loans, tax debt, alimony, and child support will not be eliminated. Under Chapter 7 Bankruptcy, mortgage debt can also be discharged, however the lender is permitted to foreclose on the home and hold you responsible for any deficiency between the foreclosure amount and remaining mortgage balance.
Chapter 7 is only a viable option for consumers with a limited income. To qualify for Chapter 7 Bankruptcy, you will be required to complete a detailed means test to determine if you have sufficient disposable income to repay your debts. If your household income surpasses the state’s median and a judge determines that you have the means to make payments on your debt, your Chapter 7 filing may be dismissed. However, you may be able to file for a Chapter 13 Bankruptcy. In limited cases, you might be able to file for Chapter 7 depending on your personal circumstances and means even if your household income is above the median.
CHAPTER 13 BANKRUPTCY
Chapter 13 is a repayment, or reorganization, bankruptcy for those with a higher income or those hoping to prevent losing personal property. Under Chapter 13 Bankruptcy, you will enter an interest-free, court-mandated repayment plan over a three or five year period rather than turning over property to discharge debts. The length of your repayment plan will be determined based on your income, property, and monthly living expenses. Typically, three-year repayment plans are given to those with a household income that falls below the state median, while five-year plans are often required for incomes above the state median. In order to qualify for Chapter 13, you must have a regular income, a total amount of unsecured debt under $394, 725, and a total amount of secured debt under $1,184,200.
Depending on your personal situation, Chapter 13 repayment plan will require you tor repay most or all of your debt. In some cases, you are able to reduce certain secured debts to the current market value of the asset rather than paying the total amount owed. After a judge has approved your proposed payment plan, creditors will be able to object, however they must allow you to attempt repayment. Chapter 13 Bankruptcy allows you the opportunity to avoid foreclosures, repossessions, service shut off or loss of property and belongings.
Upon completion of your repayment period, some of your remaining debt, such as credit card or medical bills, could be discharged. Debts that cannot be discharged and must be fully repaid include remaining mortgage debt, student loans, and debts considered Priority Debt such as child or spousal support, unpaid tax bills, and fess associated with the cost of your bankruptcy filing.
OTHER TYPES OF BANKRUPTCY
There are other types of bankruptcies you may qualify for depending on your situation or needs.
CHAPTER 11 BANKRUPTCY
Chapter 11 is a reorganization bankruptcy primarily available to businesses, corporations, partnerships, or limited liability companies. Individuals and couples who exceed the debt or income limits for a Chapter 13 Bankruptcy can also file under Chapter 11. Businesses can also file Chapter 7 Bankruptcy and liquidate debt by selling assets, however this does not allow the business to continue operation. In contrast, Chapter 11 Bankruptcy allows the business to continue operation while reorganization and repayment of debt is fulfilled.
In many Chapter 11 Bankruptcy cases, the business is able to continue with business operations on their own as a debtor in possession. The debtor will be required to seek approval from the bankruptcy court for major decisions such as sale of assets, entering into or breaking a lease of property, expansion of operations, and more. In other cases, a trustee is assigned by the court to take over operation. Trustees are most commonly appointed to debtors who have shown dishonesty, incompetence, significant mismanagement of business affairs, or for those who have committed fraud.
Under Chapter 11 Bankruptcy, repayment plans can be created without a time limit. Some businesses will be able to fulfill the terms of their repayment plan within six months, while for others it will take years to restructure. Proposed repayment plans under Chapter 11 must be approved by the bankruptcy court, but input and a formal vote is allowed from creditors or shareholders. If it is found that the business owes more than it has in available assets, owners could be left without ownership and the business will be restructured to provide creditors with ownership of the company.
Chapter 11 Bankruptcy also provides an automatic stay that will prevent litigation against you from moving forward during the duration of your case. It will allow litigation to be settled under your bankruptcy or allow litigation to continue following completion of your case.
CHAPTER 9 BANKRUPTCY
Chapter 9 is a type of bankruptcy designed for municipalities including cities, towns, counties, school districts, municipal utilities, or taxing districts. Chapter 9 Bankruptcy allows these municipalities to reorganize or restructure finances without forcing them to raise taxes on their citizens. Under Chapter 9, a municipality may file to extend repayment timelines, rewrite collective bargaining agreements, refinance debt, or request a reduction on the remaining principal or interest of debts. In some states, qualification for Chapter 9 Bankruptcy may be dismissed dependent on state labor laws. Likewise, some states require pre-authorization from the state before a municipality can even file.
CHAPTER 12 BANKRUPTCY
Chapter 12 is a type of repayment bankruptcy available to family farmers or family fishermen similar to Chapter 13 Bankruptcy. Under Chapter 12, the unique circumstances of family farmers and fishermen are taken into consideration through special provisions that allow them to restructure their finances and avoid liquidations, foreclosures, or repossessions. Chapter 12 only permits filing from family farmers and fishermen with a regular annual income that is stable and regular enough for them to follow a repayment plan. Chapter 12 provisions include a higher debt limit and additional exemptions on the property that could be liquidated to repay debt.
CHAPTER 15 BANKRUPTCY
Chapter 15 is a type of bankruptcy used for foreign debtors or businesses with international operations. Chapter 15 Bankruptcy provides foreign debtors with an opportunity to file with U.S. Bankruptcy Courts. Among other provisions, Chapter 15 allows for improved cooperation between U.S. and foreign courts in cross-border bankruptcy cases, provides for fair administration of cross-border insolvencies to protect the interests of all creditors, and facilitates assistance to businesses seeking to protect investment and prevent loss of employment.