What Are The Different Types of Bankruptcy?

Types of Bankruptcy

You may be asking your self what are the different types of bankruptcy out there?  Considering bankruptcy as a solution to your debt problems? Before you take that step, be sure that you are aware of all the facts surrounding bankruptcy.

2 Main Types of Bankruptcy

First, it is important to understand that there are actually two types of bankruptcy. These are known as Chapter 7  and Chapter 13. Below is a basic rundown of the differences between the two.
Chapter 7 bankruptcy refers to when your debts are completely discharged(Chapter 7 Bankruptcy Checklist). This means they are wiped away under a court proceeding. You are not required to pay off the debts under this type of bankruptcy.

Chapter 13 bankruptcy refers to a type of bankruptcy where a trustee is appointed by the court to administer a repayment plan for your debts. Under this plan you would pay back a percentage of your debts. Typically, the money will be paid to the trustee in one lump sum and then the trustee will pay the creditors according to whatever repayment plan has been worked out. Once all the debts are paid then you will be released from further obligation regarding the debts.

You should be aware that it is typically more difficult to file for bankruptcy under Chapter 7 in order to wipe out your debts. Generally, the court will find that if you are able to make payments, then you must instead file for Chapter 13 and repay at least a portion of your debt, if not all of entirely. So, don’t count on being able to file for Chapter 7 bankruptcy if you considering filing. Most people are now required to file Chapter 13.

Proceeding With The 2 Different Types of Bankruptcy

Types of Bankruptcy Chapter 13 Chapter 7

Typically, you will be required to obtain a certificate from a debt or credit counseling agency that is approved by the court before you can file for bankruptcy. This is a relatively new requirement. The point behind the requirement is to ensure that you learn how to manage your debt and credit in the future to avoid any further problems. To obtain the certificate you will generally be required to attend educational classes regarding debt and credit management.

You will also be required to turn in income and expense statements.  In addition to information regarding any debt repayment plans that you may have also entered. The information you will be required to submit will also typically include your pay stubs as well as tax returns and whether you anticipate any increase in income in the future. This information must be gathered within 45 days of filing a petition for bankruptcy. If you fail to provide the requested information within that time frame your case will usually be automatically dismissed.  Now you need to decided between the two types of bankruptcy.

What is Chapter 13 Bankruptcy?

What is Chapter 13 Bankruptcy

What is Chapter 13 Bankruptcy?

You may be asking yourself “What is chapter 13 bankruptcy?  What are my options with chapter 13 bankruptcy?”  When considering bankruptcy as a solution for your debt problems there are several factors of which you should be aware before taking this important step. While some people do decide that bankruptcy is still in their best interest, taking the time to understand all of the facts up front can help you to make the most informed decision possible.
Since Chapter 7 bankruptcy is becoming more and more difficult to obtain these days due to changes in bankruptcy law, we’ll focus on Chapter 13 Bankruptcy, also commonly known as reorganization.

Chapter 13 Bankruptcy allows you to file a repayment plan in bankruptcy court for your debts. It is important to understand that your debts are generally not repaid all alike under this plan. For example, some debts must be repaid in full while other debts can be repaid as only a percentage of the original debt. Still yet, some debts no not have to be repaid at all. The plans usually last from three to five years.

After Filling Chapter 13 Bankruptcy

What is Chapter 13 Bankruptcy reduce spending
Now, the debts that cannot be discharged include those that are not listed in your bankruptcy papers, the majority of all student loans, child support and alimony, most tax debts, debts for personal injury or death that were caused while driving under the influence and fines and penalties that are imposed for breaking the law. The latter would include any traffic tickets and criminal restitution.

When filing this type of bankruptcy you should be aware that the court will generally place some restrictions on how you can spend your money. As unfair as this may seem, it is best to know up front that the court can and usually will set a specific amount of money that is to be garnished from your wages to cover the repayment of your debts. A trustee of the court will be assigned in order to make the payments to your creditors on your behalf.

The amount of time that the repayment plan will be in effect will vary, but it is usually not more than five years. If you are able to maintain the repayment plan all the way through to the end it is not uncommon to be able to once again obtain credit at the end of the repayment plan. Don’t forget; however, that even if you are able to obtain credit once again, the bankruptcy will still remain on your credit history for six years, even if you’ve paid everything off.  Hopefully this has helped answers your questions about what is chapter 13 bankruptcy.

Chapter 7 Bankruptcy Checklist – What you Need to Know

By having a chapter 7 bankruptcy checklist you’ll be able to make sure you’re prepared!

chapter 7 bankruptcy checklist

Although it is becoming more difficult to file Chapter 7 Bankruptcy, it is still worth consideration in the event that you are possibly able to receive approval to file this type of bankruptcy. * Chapter 7 bankruptcy checklist below. *

Many people operate under the false assumption that Chapter 7 is a better way to file bankruptcy than Chapter 13 because the court effectively wipes out their debts and they are not required to pay them back.

This is true only to a certain degree. It is important to keep in mind with Chapter 7 Bankruptcy, also known as Liquidation Bankruptcy, that you must turn your personal property over to the court in order for it to be sold and the proceeds used to pay off your debts, or at least a portion of your debts.

Unlike Chapter 13, there is no repayment plan. This means that creditors no longer have the ability to pursue you for payment; however, the bankruptcy will remain on your credit record for 10 years. As a result, it is possible that you will be denied credit during that time period.

Chapter 7 bankruptcy checklist

To file Chapter 7, you must turn over the following information to the court.

1. A list of all creditors and the amount of each claim
2. The source, amount and frequency of your income
3. A list of all your property
4. A detailed list of all your monthly living expenses including food, clothing, shelter, taxes, utilities, transportation, medicine, alimony, child support, etc.

New bankruptcy laws were passed in 2005 regulating who is allowed to file for Chapter 7 Bankruptcy and who is not allowed to file for it, thereby leaving only Chapter 13 Bankruptcy as an option. In order to file for Chapter 7 Bankruptcy your income must be below the median income for the same size family in your state or you must proceed through what is known as a bankruptcy means test. The latter places extremely strict restrictions on your spending.

Now in many cases you will be allotted about $200 per month for food and less than $800 to spend on housing and utilities per month. In most cases, if the court sees that you have $100 per month or more in disposable income (according to their guidelines) then you will be required to file under Chapter 13 instead of Chapter 7.

In addition, it is possible that not all of the debts may be discharged under a Chapter 7 Bankruptcy filing. Certain taxes, debts for certain education over payments or loans, child support, alimony and debts for death or personal injury as well as debts for criminal restitution orders are not discharged and the you will continue to be liable for them.