« Charge Offs - You May Not Have to Pay | Home | How to Pay of a 15 Year Mortgage Early and Fast! »
How To File With Each Type Of Bankruptcy!
By Chris Safin | August 7, 2008
If you are an individual in the US you can apply for two different types of bankruptcy. The first is chapter 7 which can totally eliminate all of the individual’s debts. The second is chapter 13; with this option the individual’s debts will be paid off during the following five years.
Businesses cannot file under chapter 7 nor 13, they must instead file under Chapter 11. They will be able to use Chapter 11 to renegotiate their debt and too generally reorganize them so they can get back on the road to financial health.
A quick consultation with a bankruptcy attorney will help determine which of the types of bankruptcy the individual qualifies to file under. There are certain tests administered to determine if the individual qualifies to file Chapter 7 under the new bankruptcy laws.
The main part of the test for an individual will consist of an income calculation to find out whether or not the individual has a monthly income that is higher than the state average, if he or she does the individual would then have to file under chapter 13 and would not be allowed access to chapter 7.
If an individual is given a green light for chapter 7 bankruptcy, he or she will be able to eliminate all debts including the secured and even unsecured debts. But it is possible that some of the individual’s assets will be confiscated and sold off so as to pay off some of the individual’s debts.
Clearly out of chapter 13 and chapter 7 bankruptcies, it is chapter 7 which will provide the most financial relief.
Paying your debts off over time
If the individual has to file for chapter 13 instead of chapter 7 they will be required to send monthly payments to a court trustee, the court trustee will then send out payments to any creditor who is listed as part of the payment plan.
Chapter 13 will allow the individual to honor their financial obligations and at the same time stop creditors from demanding collection actions against the debtor.
In the past, a lot of people may have started out in Chapter 13 bankruptcy and found they were unable to meet the obligations and so moved into Chapter 7.
However since 2005 when the all-new bankruptcy laws became law, the only way to qualify for chapter 7 bankruptcy is to come up with a below average monthly income result in the courts means test.
So basically if an individual has the means as it were, the current income level, to be capable of paying off their debts, they will be restricted whether they like it or not to a chapter 13 bankruptcy.
On either of the types of bankruptcy, any assets or initial payments will be directed to those creditors that have what is considered priority access such as past due income taxes, student loans and other government obligations.
When all priority access creditors have had their debts resolved, the paying off of debts process will then move on to those creditors that were unsecured.
When you’ve filed bankruptcy the fact that you have done so can stay on your public record for as long as 10 years into the future! So you really must carefully consider all your options before taking on a bankruptcy, bankruptcy should always be your last option.
Topics: Finance |