What Exactly Is A Chapter 7 Bankruptcy?
Chapter 7 bankruptcy allows you to eliminate most of your unsecured debt, with certain exceptions. It provides a fresh start for honest people who have no way to pay back all of their debt. In order to qualify, you have to pass what’s commonly referred to as the “means test.” The means test sets a ceiling, which is a maximum gross amount that you are allowed to make in order to qualify for a Chapter 7 bankruptcy. The amount is determined by your family size. If the gross income for your family size is under the ceiling, then you can proceed with the Chapter 7 bankruptcy. If you fail the means test, you would need to file a Chapter 13 bankruptcy and pay back some of the debt.
What Will I Be Able To Keep In A Chapter 7 Bankruptcy?
You will typically keep most of your assets, such as your house, car, and furniture in a chapter 7 bankruptcy. It depends on the value of your assets and how much equity you have in your assets. A bankruptcy attorney will review your assets to see what it is that you can keep. The law does allow you to keep a certain amount of assets because they realize that the Chapter 7 bankruptcy is a fresh start and if they take everything away from you, it’s going to be impossible for you to get that fresh start. Most people don’t have an exorbitant amount of assets that they would lose in a bankruptcy. The clients I have represented have never lost any of their assets.
Which Types of Debt Can Be Discharged In a Chapter 7 Bankruptcy and Which Cannot?
Chapter 7 will eliminate most unsecured debt, such as credit cards, medical bills, payday loans, and personal loans. There are certain items that cannot be eliminated. The most common types of debts that are non-dischargeable are student loans, certain income taxes, parking tickets, child support, debts incurred due to fraud, willful injury to someone, and death or injury caused by the operation of a motor vehicle while under the influence of drugs or alcohol.
What Is A Chapter 13 Bankruptcy?
Chapter 13 bankruptcy allows you to reorganize your debts and permits you to make one payment that covers all of your debts. The best part of a Chapter 13 reorganization is that the majority of the time you pay back the debt to the unsecured creditors with no interest. You can typically pay back less than the total amount owed as well. How much of the unsecured debt you pay depends on your income and expenses and the results of the “means test.” Chapter 13 bankruptcy also allows you to pay back a portion of your debts that would otherwise be non-dischargeable in a Chapter 7, such as parking tickets. Chapter 13 bankruptcy allows you to pay back your debt over a period of between 3 to 5 years.
Chapter 13 bankruptcy can help you save your house and your car, if you are behind on your mortgage or car payments. It allows you to pay the past due mortgage in your Chapter 13 case. It also allows you to pay your car in the plan. In some cases you can reduce the amount that is to be paid on your car to the fair market value of the car and you can also reduce the amount of interest that you pay on the car.
What Requirements Must Be Met In Order To File A Chapter 13 Bankruptcy?
The main requirement for Chapter 13 bankruptcy is that you have income. Since it is a repayment plan, the court will want to see that you actually have the ability to make the payments. Chapter 13 bankruptcy also has debt limits. As of April 1, 2019, the debt limit for secured debt is $1,257,850 and the debt limit for unsecured debt is $419,275. These debt limits are revised every three years.
What Type Of Debt Is Typically Dischargeable In A Chapter 13 And What Is Not?
The debts that are discharged in a Chapter 13 are usually the same as those discharged in a Chapter 7 and it also allows you to discharge municipal fines, like parking tickets.
What Assets Can I Keep In A Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is good for people who have assets. Since a Chapter 13 bankruptcy is a repayment plan, it allows you to keep all of your assets, no matter the value. Since you’re paying back your debt, you don’t have to worry about losing any of your assets.
It is always easier to qualify for a Chapter 13 bankruptcy, assuming that you have income, because it is a repayment plan. However, not everyone can afford to fund a Chapter 13 bankruptcy plan. Those people who cannot afford to fund a Chapter 13 plan usually qualify for a Chapter 7 bankruptcy. An experienced bankruptcy attorney can review your financial situation and tell you which bankruptcy is best for you. Read More
What Are The Differences Between A Chapter 7 And A Chapter 13 Bankruptcy?
The major difference between Chapter 7 and Chapter 13 bankruptcy is that Chapter 7 bankruptcy eliminates your unsecured debt and Chapter 13 bankruptcy is a reorganization wherein you repay your debt. Which one is better for you depends on your particular situation. In some cases, Chapter 7 bankruptcy is best and in other cases, Chapter 13 bankruptcy is best. Only an experienced attorney, who actually takes the time to go over and review your financial situation, can recommend what is right for you.
For more information on Chapter 7 & Chapter 13 Bankruptcy In Illinois, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (630) 509-8989 today.
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