Who Can File Bankruptcy?
There
are very few limitations on who can file for Chapter 7 bankruptcy. You can qualify
as long as you're willing to a follow a financial plan - and as long as you understand
there will be long-term negative consequences on your finances.
Chapter
13 is limited to individuals (and unincorporated businesses) that have a regular
source of income and whose secured debt is less than $750,000 with unsecured debts
of less than $250,000. The term "regular source of income" refers to income that
is sufficient enough to enable regular payments by the trustee to creditors.
What
is Included In Your Bankruptcy Estate?
The
property that can be liquidated to pay your debts is called your 'bankruptcy estate'
and consists of all property that is solely owned or co-owned with another person.
This includes property that was received through an inheritance, a divorce settlement,
a gift or life insurance proceeds.
The estate
is reduced by 'exempt assets', which may include a limited amount of equity in
your personal residence, vehicles, household goods and personal effects, tools
of your trade, life insurance and even deposit accounts. Generally, retirement
benefits are excluded from the bankruptcy estate altogether. The remaining balance
is available to the trustee to administer to pay off your debt.
The
Difference Between Chapter 7 and Chapter 13 Bankruptcies
Chapter
7 Bankruptcy eliminates your financial obligations through a court decision. In
turn, you must turn over non-exempt assets that will be sold to pay your creditors.
Keep in mind that not all debts are subject to discharge under a Chapter 7 bankruptcy
claim.
Chapter 13 Bankruptcy, on the other
hand, does not eliminate your financial obligations altogether. It provides a
plan for your future income to be administered by the court to repay your creditors.
After determining a reasonable budget, your remaining income is managed by a trustee
who will pay your creditors in accordance with the approved plan. A plan generally
lasts three years, but may last up to five years if the court approves the longer
period. At the conclusion of the plan, the debtor is entitled to receive a discharge
of any remaining debt.
Procedures for
Filing Bankruptcy
STEP 1: Collect
all your financial information i.e. assets, debts, income, expenses, etc. and
a Statement of your Intentions.
STEP 2:
File the petition, schedules, and statement of financial affairs. Pay the filing
fee to the bankruptcy court.
STEP 3:
Your creditors are notified by the court of the case and information pertinent
to their possible recourse or challenges.
STEP
4: Meet with your creditors and the court appointed trustee to exam your situation
and answer questions posed to you by your creditors.
STEP
5: Complete the reaffirmation, redemption or surrender of secured collateral
according to the Statement of Intentions filed with the case
STEP
6: All parties will receive the discharge notice approximately 90 days after
filing Chapter 7 or at the conclusion of payments in a Chapter 13 case.
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