Upon the filing of a Chapter 7 or Chapter 13 Bankruptcy, an Automatic Stay is entered which prevents all creditors from attempting any collection of debts outside of the bankruptcy process.

A debtor must pass the “Means Test” to qualify for Chapter 7 Bankruptcy. This means that the debtor’s income must be below the State’s median income for a family of their size.

In a Chapter 7 Bankruptcy, the debtor must disclose what assets they own, how much they are worth and how much equity they have in each asset. The Trustee assigned to the case will review the assets and determine whether there are any assets that cannot be protected by the debtor’s exemptions which would provide the Trustee some money to pay toward the debts. It is rare for a person to lose any assets in a Chapter 7 Bankruptcy as the available exemptions are quite generous. If an asset is at risk of being liquidated in a Chapter 7 Bankruptcy, the filing of a Chapter 13 Bankruptcy may be preferable.

In a Chapter 13 Bankruptcy, an individual prepares plan to repay any debts that must be paid back through bankruptcy, such as mortgage arrears and tax debts, and receive a discharge of the remaining general unsecured debts at the completion of the plan. Typically, a Chapter 13 Bankruptcy repayment period is three to five years. Some debts that are not dischargeable under a Chapter 7 Bankruptcy are dischargeable under a Chapter 13 Bankruptcy.

The Means Test will help determine how much an individual must pay back in a Chapter 13 Bankruptcy.

Both Chapter 7 and Chapter 13 Bankruptcy cases stop creditors from contacting you immediately, prevent creditors from attempting to collect on debts and ultimately lead to the discharge of many unsecured debts.  The information needed from an individual is the same regardless of whether they plan to file Chapter 7 or Chapter 13. 

The biggest difference between Chapter 7 and Chapter 13 is that Chapter 7 focuses on discharging (eliminating) unsecured debts such as credit cards, personal loans, and medical bills while Chapter 13 allow a person to catch up on missed payments on secured debts such as a mortgage or vehicle loan while also discharging unsecured debt.

Whether or not to file a bankruptcy, and which bankruptcy to file, are difficult decisions.  The guidance of an attorney with years of experience in the Bankruptcy Court will make this seemingly daunting process a manageable one.  An attorney will let you know what information and documents you will need to gather and assist you in preparing the formal bankruptcy petition.  In addition to answering your questions, the attorney will be able to apply your personal situation to the required Means Test which will determine which bankruptcy you may qualify for.  An attorney will act as your guide through the bankruptcy process and make sure that not only is a proper bankruptcy petition filed with the Court to start the process, but also will assist you in preparation for the Trustee Meeting that is required with every bankruptcy filing.