If you file for bankruptcy do you get to pick which bankruptcy code chapter that is used or is this chosen for you by the bankruptcy court? A common misconception with most debtors is that this is a decision that you get to make. Each chapter of the bankruptcy code will involve certain requirements that must be met. If you case does not meet the requirements for the chapter you have chosen then you can not file under that specific chapter, and you must use the chapter whose qualifications you do meet. Sometimes you may qualify for more than one chapter. When this occurs then you can choose between all of the chapters that you will qualify for. Sometimes there is no choice allowed because you only qualify under one chapter.
Each chapter of the bankruptcy code has specific income requirements that you must meet. These requirements take into account the state that you reside in and the size of your family. This is called the Means Test and it is designed to help determine which chapter you can file under. With chapter 7 most or all of your debts are typically discharged and you do not have to repay any of these debts. They are erased and you legally no longer owe the creditor when a debt is discharged. The Means Test considers all of your income, your expenses, your current debts, and any additional amounts that you are using to pay off the debts that you owe.
If the Means Test shows that there is an amount of disposable income that is available after all of your expenses and required debts are paid each month then you may have to file under chapter 13, which includes a repayment plan. Chapter 13 bankruptcy includes creating a repayment plan that the court will approve. This plan may last from 3-5 years. After the required repayment plan is completed then any remaining debts are usually discharged and wiped clean. Many debtors would prefer to file under chapter 7 because no payments are necessary, most debts are fully eliminated, and the case if finished in 6 months to a year most of the time. The idea behind bankruptcy is not to offer a free pass on your debts, but to give you a brighter financial future and allow you to deal with your debt on more favorable terms.
If you do not have a steady source of income, your debts are so large it is not possible to pay them off in a reasonable amount of time, or you have little in the way of assets then you will usually qualify for a chapter 7 bankruptcy. To qualify for a chapter 13 filing, which may help you keep your home and catch up on any past due mortgage payments, you must have at least a small amount of disposable income each month that can be put towards your debt. An experienced bankruptcy lawyer can help you determine which chapter of the bankruptcy code you qualify for, and then help you get the debt relief that you need.