You should consult with an attorney before you decide to file for bankruptcy protection.
There are two major types of personal bankruptcy protection – Chapter 7 and Chapter 13.
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Benefits | Some of the benefits of filing under Chapter 7 include – stopping foreclosure, stopping wage garnishments, releasing liens on your banking accounts, and stopping creditor harassment. Most of your debts go away, and you usually can keep all of your property. | Some of the benefits of filing under Chapter 13 include – getting current on mortgage payments to prevent foreclosure, repaying tax debt, getting current on your child support obligations, stopping wage garnishments, releasing liens on your banking accounts, and stopping creditors from harassing you. Under Chapter 13, you are agreeing to enter into a repayment plan with your creditors and allowing the Court and your Trustee to monitor your finances for 3 – 5 years. You agree to the, “Rights and Responsibilities Statement.” |
| What Debts Go Away and What Debts Stay | Under Chapter 7, most if not all of your debts are discharged, or no longer owed. Some examples of debts that you may still owe after a Chapter 7 filing are taxes, student loans, child support, alimony, and fines for criminal activity. Not all taxes or student loans will survive a Chapter 7 filing – make sure you are meeting with a bankruptcy attorney who will put you in the best financial situation possible. | Most of your debts must be paid off while your Chapter 13 case is active, which is normally 3 – 5 years. Some debts can’t be paid off over 3 – 5 years, like a mortgage or student loans. Those types of long-term debts will survive a Chapter 13 filing and you will be responsible for paying those debts after your Chapter 13 discharge. |
| Qualifications | Not everyone can file under Chapter 7. You must make less than a certain amount of money to file under Chapter 7. If your household’s income is above the U.S. Trustee’s threshold, that doesn’t mean you can’t file under Chapter 7, it just means you need to account for certain types of allowable expenses, such as taxes, health insurance, child care, charitable contributions, mortgage and auto loans, and some other expenses on the, “Means Test.” You should consult with an attorney before deciding whether you qualify for Chapter 7 bankruptcy relief, unless you have a complete understanding of all available deductions on the, “Means Test.” (Further, it is impossible for anyone who is not an attorney to help you with the, “Means Test,” because doing so would be the unlicensed practice of law, which is unlawful.) | If you have income, you will likely qualify for Chapter 13 bankruptcy relief. |
| What Property You Can Keep | You may not be allowed to keep all of your property. If you have a loan on a piece of property, the, “equity,” is the difference between the loan balance and the value of the property. If you owe more than what the property is worth, there is no equity, which is the best case scenario in a Chapter 7 filing. If you own property, like your household furniture, you need to know the value of that property before knowing whether you can keep the property. If your property will not be protected after filing under Chapter 7, then the Trustee may take your property and sell it for the benefit of your creditors. | Very few limits exist on the value of the assets you can keep, meaning you can normally keep everything even if there is equity. |
| Court Fees and Attorney Fees | The Chapter 7 Court fee is $306.00. The attorney fees for a Chapter 7 filing vary based on your situation. For example, if you don’t own a car or a house, your attorney fees may be less than $1,000.00, but if you own 5 cars and 5 houses, your attorney fees will be much more than $1,000.00.We promise to quote you a fair and reasonable fee at the conclusion of our first meeting, and will even agree to accept payments on those fees. | The Chapter 13 Court fee is $281.00. The attorney fees for a Chapter 13 filing vary based on your situation, but generally range from $2,500.00 – $4,000.00. You are responsible for paying between $500.00 – $700.00 before your case is filed and the balance is paid by your Trustee. We promise to quote you a fair and reasonable fee at the conclusion of our first meeting. |