Bankruptcy Rights

Filing bankruptcy is a serious decision in a person’s life. When property or other assets are involved,
the decision can be even more important.

Chapter 13 bankruptcy is designed to help those debtors who do have property, secured debts, or other assets that they want to
protect throughout the bankruptcy process. For debtors who have a regular income, Chapter 13 can be a helpful way to reestablish
financial stability.

Because of the asset protection involved with Chapter 13 bankruptcy, the process typically takes a bit longer than it would take
to receive a Chapter 7 bankruptcy discharge.

While under the protection of a Chapter 13 repayment plan, a debtor should have the means necessary to eliminate debt.
Repayment plans can last from 3-5 years.
Talking with a local bankruptcy attorney may be a good way to get bankruptcy information and learn about filing bankruptcy
(http://www.totalbankruptcy.com/overview/default.aspx).

Chapter 13 Bankruptcy Process

Chapter 13 bankruptcy does not eliminate debt, but instead consolidates, prioritizes and sometimes reduces the debt.
Under Chapter 13, debtors are able to pay one monthly payment to a bankruptcy trustee instead of having to manage and pay several
bills each month.
Whether Chapter 13 is right for a specific person depends completely upon the individual situation. If a person has filed Chapter
7 bankruptcy within the last eight years, they will be ineligible to file Chapter 7 again – so Chapter 13 might be an option at that
point.

Chapter 13 Bankruptcy Qualifications

Most debtors who are considering bankruptcy can qualify for Chapter 13 bankruptcy.
So, when is Chapter 13 a good option? For a debtor who:

• Owns cars, homes or land that needs to be completely protected from liquidation
• Has debt from job loss, injury or sickness
• Still have a regular income to make monthly payments to a bankruptcy trustee

Under Chapter 13 bankruptcy, debtors are not required to take a means test like those who file Chapter 7 bankruptcy are required to take. For most people who have a steady income, Chapter 13 bankruptcy is an option.
Debtors filing Chapter 13 are still required to complete an approved Credit Counseling Briefing approved by a U.S. Trustee. When filing for bankruptcy, a bankruptcy lawyer will include the Credit Counseling certificate with the bankruptcy petition.
If the certificate is not included, that bankruptcy case may be dismissed from the court.

Chapter 13 Bankruptcy Discharge Requirements

In addition to making regular payments to a bankruptcy trustee through the Chapter 13 bankruptcy repayment plan, debtors in Chapter 13 bankruptcy must also complete a Debtor Education Course about financial management.
Without completing the education course, debtors cannot be discharged from Chapter 13 bankruptcy. A bankruptcy lawyer can help recommend an approved Debtor Education Course.

Chapter 7 vs Chapter 13

For the majority of individuals looking to file bankruptcy, there are two main personal bankruptcy options: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Deciding which is the right option for you depends on a number of circumstances, including how much debt you have, your level of income, and whether you have any valuable property you’d like to keep.
First some basics: Chapter 7 bankruptcy is designed to eliminate unsecured debts, and may provide a complete discharge of debts related to credit cards, medical bills, payday loans and most personal loans.

Chapter 7 involves liquidation of assets—however, most Chapter 7 cases don’t involve liquidation, because bankruptcy allows you to keep some property, known as exemptions.
Benefits of Chapter 7 generally include:

• Forgiveness of unsecured debts
• Protection against creditors
• Fairly fast process (typically takes 6-9 months)

Chapter 13 bankruptcy is a structured repayment of debts, and is designed for those with a regular source of income and secured debts, like a mortgage or auto loan. The bankruptcy court works with you and your creditors to create a budget and a payment plan, which may include only a portion of your actual debts.

The Chapter 13 repayment plan lasts three to five years, during which time you will make regular monthly payments for past-due debts to the bankruptcy court—not your creditors.
Benefits of Chapter 13 generally include:

• Protection of property, including house and car
• Protection for co-signers on debts
• Payments to bankruptcy trustee and not creditors

Both bankruptcy chapters provide the protection of the automatic stay—a court-order that typically prevents creditors from attempting to collect on debts. The automatic stay can last for the duration of the bankruptcy case, providing protection from when you file until you receive your debt discharge.

Means Test

One major element in the choice between Chapter 7 bankruptcy and Chapter 13 bankruptcy is the means test. This test is used to determine whether a complete debt discharge under Chapter 7 bankruptcy could be an abuse of bankruptcy’s powers.

The bankruptcy means test looks at your income and compares it to the median income of your state. If you fall below the median income level, you are typically allowed to file for Chapter 7 bankruptcy.
However, if your income level is above the median, the court looks at your disposable income in relation to your level of unsecured debts. If your disposable income, after certain allowable expenses, is enough to satisfy your debts in a Chapter 13 repayment plan, the court will typically recommend you file a Chapter 13 bankruptcy, or may dismiss your case.

Because the bankruptcy means test is a complicated—and mandatory—process, you may wish to work with a local bankruptcy attorney to help guide you through the process.
Requirements for Chapter 13 bankruptcy are less strict. To file under Chapter, an individual must have unsecured debts less than $336,900 and secured debts less than $1,010,650.
The above summary of personal bankruptcy laws is by no means all-inclusive and is not intended to serve as legal advice. Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.