Types of Bankruptcy
There are several types of bankruptcy for which individuals or married couples can file, the most common being Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a chance to receive a court judgment that releases you from responsibility for repaying debts. You are permitted to keep key assets, considered “exempt” property, but “non-exempt property” will be sold to repay part of your debt. Property exemptions vary from state to state. You may choose to follow either state law or federal law, which may allow you to keep more possessions.
Examples of exempt property include your home, the car you use for work, equipment you use at work, Social Security checks, pensions, veteran’s benefits, welfare and retirement savings. These things can’t be sold or used to repay debt. Non-exempt property includes things like cash, bank accounts, stock investments, coin or stamp collections, a second car or second home, etc. Non-exempt items will be liquidated and the proceeds used to repay lenders. Your assets will be sold by a court-appointed bankruptcy trustee. The proceeds go toward paying the trustee, covering administrative fees and, if funds allow, repaying your creditors as much as possible.
Chapter 7 is the most popular form of bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcies make up about 30 percent of non-business bankruptcy filings. A Chapter 13 bankruptcy involves repaying some of your debts to have the rest forgiven. This is an option for people who do not want to give up their property or do not qualify for Chapter 7 because their income is too high. People can only file for bankruptcy under Chapter 13 if their debts do not exceed a certain amount. The specific cutoff is reevaluated periodically, so check with a lawyer or credit counselor for the most up-to-date figures. Under Chapter 13, you must design a three- to five-year repayment plan for your creditors. Once you successfully complete the plan, the remaining debts are erased.
Please call 855-385-8182 to speak with a member or our staff about your bankruptcy.