Debt Relief Options
Before filing a bankruptcy case, you and your attorney should analyze your eligibility for the different forms of debt relief available and which form will be most beneficial for you. Be sure you understand the type of relief that you can obtain and its limitations.
Chapter 7: Liquidation (Total filing fee $306.00)
The purpose of filing a chapter 7 case is to obtain a discharge of most of your existing debts. Chapter 7 is designed for those in financial difficulty who do not have the ability to pay existing debts.
- If you have primarily consumer debts, you will be subject to a “means test” to determine whether your case should be permitted. If your income is greater than the median income for your state of residence and family size, creditors may have the right to deny your case.
- Under chapter 7, you may claim certain property as exempt under governing law. A trustee may have the right to take possession of and sell the remaining property not exempt and use the sale proceeds to pay your creditors and other debt.
- Even if you receive a chapter 7 discharge, certain type of debts are by law not dischargeable. After the case you will still be liable for:
- tax debts
- student loan debts
- debts incurred to pay nondischargeable taxes
- domestic support and property settlement
- most fines, penalties, forfeitures, and criminal restitution
- debts not properly listed in your bankruptcy papers
- debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated
- debt arising from fraud, breach of fiduciary duty, theft, or willful and malicious injury
Chapter 13: Repayment of All or Part of the Debts of an Individual with Regular Income (Total filing fee $281.00)
Chapter 13 is designed for individuals with regular income who would like to pay all or part of their debts in installments over a 3 to 5 year period.
- To be eligible for chapter 13 your debts must not exceed the dollar amounts set forth in the Bankruptcy Code.
- Under chapter 13, you must file a plan and get it approved with the court to repay your creditors all or part of the money you owe them, using your future earnings.
- After completing the payments under your plan, all of your debts will be discharged except:
- debts for domestic support
- most student loans
- certain taxes
- most criminal fines and restitution
- debts not properly listed in your bankruptcy papers
- debts for acts that caused death or personal injury
- long term debts secured by valid mortgages or liens
Chapter 11: Reorganization (Total filing fee $1,213.00)
Chapter 11 is designed for the reorganization of a business, but is also available to consumer debtors. Its provisions are quite complicated, and any decision by an individual to file a chapter 11 petition should be reviewed with an attorney.
Chapter 12: Family Farmer or Fisherman (Total filing fee $246.00)
Chapter 12 is designed to permit family farmers and fishermen to repay their debts over a period of time from future earnings and is similar to chapter 13. The eligibility requirements are restrictive, limiting its use to those whose income arises primarily from a family-owned farm or commercial fishing operation.
Is Bankruptcy Right for You?
If you do decide to seek bankruptcy relief, you may represent yourself,
you may hire an attorney to represent you, or you can get help in some
localities from a bankruptcy petition preparer who is not an attorney. THE
LAW REQUIRES AN ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE YOU A
WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY PREPARER
WILL DO FOR YOU AND HOW MUCH IT WILL COST. Ask to see the contract before you hire anyone.
If you're still not sure if bankruptcy is the best option, contact us for a free consultation.
