What Is A Chapter 7 Bankruptcy? What Requirements Must Be Met To File A Chapter 7?
A Chapter 7 bankruptcy is a liquidation. It’s a fresh start given to consumer debtors, and it’s available to people who have more debt than assets with the inability to pay their debt with their current income. Before filing for Chapter 7 bankruptcy, you are required to submit to the means test to make sure that you fit within the threshold that relates to your state. You must complete the schedules, the statement of financial affairs, take the course, pay the fee, and submit to a 341 meeting. The 341 meeting is a meeting of creditors where the trustee and creditors ask you questions about your financial circumstances. The meeting occurs after you file your petition that shows your assets, debts, and claimed exemptions, and after completing the financial disclosure forms.
What Assets Will I Be Able To Retain By Filing A Chapter 7 Bankruptcy?
Most Chapter 7 bankruptcies are no-asset bankruptcies. That means that whatever assets the consumer has been exempt from being liquidated to pay creditors. There are a lot of exemptions. For instance, a certain level of personal property like furniture and clothing are exempt. If you’re able to continue to pay the mortgage, your house can be exempt. Your car can be exempt as well up to a certain value. A certain amount of cash, retirement accounts, and annuities can also be exempt. Exemptions will depend on each individual situation.
What Is A Chapter 13 Bankruptcy?
A Chapter 13 is a consumer reorganization. It’s a method by which the consumer pays off debts over an extended period of time. The debts are usually paid over a three to five-year period. During that time, you stretch out the obligation to pay your creditors in accordance with a repayment plan. That plan is based on your income over the three to five-year period versus what your obligations are for paying liabilities or debts. The repayment plan is submitted to the court and is subject to the court’s approval. Creditors can object to that plan if they don’t feel it’s appropriate, or if it doesn’t meet the standards for confirmation of a Chapter 13 plan.
In any event, your debts get paid off over a lengthier period of time while you’re in the Chapter 13 plan. As long as you comply with the terms of the plan, you will not be subject to foreclosure, writs of garnishment or attachments, and things of that nature that creditors ordinarily undertake to try to collect on debts.
What Requirements Must Be Met To File A Chapter 13 Bankruptcy?
Typically, if you are above the state median income threshold, then you most likely qualify to file for Chapter 13. In other words, that means that you have sufficient income to pay off your debts in an extended amount of time.
What Assets Will I Be Able To Keep In A Chapter 13 Bankruptcy?
In a Chapter 13, you are basically able to keep all of your assets because it is not a liquidation bankruptcy. You’re keeping your assets based upon the premise that you are paying off all of your debts over time in accordance with your plan.
What Are The Major Differences Between A Chapter 7 And A Chapter 13 Bankruptcy?
The means test is the primary method by which to determine which bankruptcy is best for you. It comes down to whether or not you have income and the ability to pay debts over time. If you have the income to support a repayment plan, then you would qualify for Chapter 13 versus Chapter 7. In Chapter 7, which is a liquidation, you don’t have sufficient income to pay off your debts, and so, those debts would be discharged and your assets liquidated. However, usually in a Chapter 7, there are no assets to liquidate because what assets you have would be exempt.
For more information on Chapter 7 Bankruptcy Vs Chapter 13 Bankruptcy, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (954) 900-9575 today.