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Bankruptcy Explained

CHAPTER 7 BANKRUPTCY

Picture of a gavel on a white background

There are basically two types of bankruptcies for individuals or married couples can file. These two types of bankruptcies are referred to as Chapter 7 bankruptcy and a Chapter 13 bankruptcy. A chapter 7 bankruptcy is a liquidation. Non-exempt assets are liquidated and if there are any assets over and beyond the bankruptcy exemptions distributed on a percentage basis to the creditors. In the large majority of all Chapter 7 bankruptcies the debtor pays nothing to the creditors and the creditors receive zero.

CHAPTER 13 BANKRUPTCY

The second type of bankruptcy is a Chapter 13. This is basically a wage earner plan. The debtor pays the secured creditors example a car loan, mortgages, 100 cents on the dollar as to what is owed. The unsecured (example: credit cards, personal loans, debts owed to hospitals and doctors) usually are paid a lesser percentage then 100 cents on the dollar. This type of bankruptcy will last anywhere from 3 to 5 years.

FILING A CHAPTER 7 BANKRUPTCY

There are a variety of things that need to be done with regard to the filing of a Chapter 7 bankruptcy. The following is a list of some of these items:

  • You must pay a Court filing fee of $335.00 when filing a Chapter 7 bankruptcy.
  • A credit counseling course must be completed from an approved agency and documentation of this must be filed with the court.
  • Petitions must be filed with the court.
  • A trustee will be appointed and there will be a scheduled creditors meeting before the bank and the chapter 7 bankruptcy trustee in which the debtor must attend and give testimony.
  • Parking tickets, child support, spousal maintenance, student loans, sales tax, income taxes and a variety of other debts are non-dischargable in bankruptcy.
  • Bankruptcy attorneys don’t work for free. They usually charge between $1,500.00 and $3,500.00 to file a chapter 7 bankruptcy.
  • There is an income requirement test called the bankruptcy means test an individual must qualify for when filing a Chapter 7 bankruptcy.

REQUIREMENTS FILING A CHAPTER 13 BANKRUPTCY

The following are some of the requirements necessary to filing a chapter 13 bankruptcy:

  • There is a $274.00 filing fee
  • You must take a credit counseling course by an approved agency and document it has been taken.
  • You must file a chapter 13 repayment plan.
  • You need to meet monthly income requirements and monthly payment requirements pursuant to the chapter 13 plan.
  • You have to file schedules and petitions with the bankruptcy court.
  • Bankruptcy attorneys usually charge between $3,000.00 and $5,000.00 to file a chapter 13 bankruptcy plans.

Conclusion:

Attorney Elliot Schlissel

There are many reasons for filing bankruptcy – loss of employment, medical issues, inability to pay debts as they come due, mismanagement of finances, excessive credit card use, and many additional reasons. However all Americans should be aware that the filing of a bankruptcy takes place in the United States Bankruptcy Court and every American has a right to file bankruptcy. The filing of a bankruptcy cannot be used against you for any purpose and any discrimination or action taken as a result of your filing bankruptcy may allow you to take legal action to deal with this matter.

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