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Will Chapter 7 or Chapter 13 work best for you?

What Different Types of Bankruptcy Should I Consider?

There are two basic types of bankruptcy cases provided under the law:

Chapter 7 is known as “straight” bankruptcy. It requires a debtor to give up property which exceeds certain limits called “exemptions,” so the property can be sold to pay creditors. Usually, all property is exempt and you won’t lose anything.

Chapter 13 is called “debt adjustment.” It requires a debtor to file a plan to pay debts (or parts of debts) from current income.

Either type of case may be filed individually or by a married couple filing jointly.

If your income is above the median income for a family the size of your household in your state, you may have to file a chapter 13 case. If the consumer is found to have a certain amount left over that could be paid to unsecured creditors, the bankruptcy court may decide that the consumer can not file a chapter 7 case, unless there are special extenuating circumstances.

Chapter 7 (Straight Bankruptcy)

In a straight bankruptcy case, you file a petition asking the court to discharge your debts. The basic idea in straight bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors. Straight bankruptcy does not require you to pay any of your wages to the Trustee nor to any creditors.

If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan (secured creditors), a chapter 7 case may not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt. But, if you are current on your secured debts, then you will be able to continue paying your secured creditor during and after the bankruptcy in order to keep the collateral.

Chapter 13 (Repayment Plan)

In a repayment plan you file a “plan” showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a repayment plan case is that it will allow you to keep valuable property--especially your home and car--which might otherwise be lost, so long as you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind.

You should consider filing a chapter 13 plan if you:

·         Own your home and are in danger of losing it because of money problems;

·         Are behind on debt payments, but can catch up if given some time;

·         Have valuable property which is not exempt, but you can afford to pay creditors from your income over time.

·         You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due.

I welcome your questions and will be happy to provide you with a free initial consultation.  Just give me a call or send a fax or e-mail:

Robert J. Doig
Attorney at Law
SpringsBKLaw.com

2985 Broadmoor Valley Road, Suite 4
Colorado Springs, CO 80906
719 227-8787  Office
719 325-8355  Fax
Info@SpringsBKLaw.com


We are a debt relief agency. We help people file for relief under the Bankruptcy Code.