Filing for bankruptcy as a single individual or married couple will normally mean filing under either chapter 7 or chapter 13 of the bankruptcy code, and the difference will be based on the income, debts, and assets of the petitioners. Chapter 7 bankruptcy is known as the option that eliminates the debts in the case completely, and there is no repayment plan needed. With a chapter 13 bankruptcy case a specific repayment plan is required, and this plan may last from 36-60 months. During the period of the repayment plan all income must be reported to the court, along with all expenses and monthly bill amounts. After the expenses and reasonable costs are deducted from the income of the petitioner any remaining funds will be used to pay down the debts owed in the case.
What many individuals do not realize is that even a chapter 13 bankruptcy case may involve the discharge of many debts which can total a significant amount. To qualify for a chapter 13 bankruptcy filing you must have a steady and reliable source of income. Without an income it will not be possible to schedule regular payments to the court which can be applied to your debts. In many chapter 13 bankruptcy cases the exemptions allowed cover most or all of the property owned. This means that the trustee will not seize and liquidate any property to pay off the creditors with. Until the repayment period is complete none of the debts listed will usually be discharged, and will be listed in order of priority to receive payment from the funds submitted to the court.
Chapter 13 bankruptcy allows you to reorganize your debt, and in many cases will allow debts to be discharged after the case ends that a chapter 7 filing can not achieve. A mistaken belief about bankruptcy is that chapter 7 offers debt discharge and a fresh financial start while chapter 13 forces you to pay off your debts completely. Both chapters of the bankruptcy code allow debts to be discharged when the case ends. The difference is that usually a chapter 7 case will end between 6 months and 1 year after the case is filed. A chapter 13 case may last up to 5 years, and may allow the discharge of debts that a chapter 7 filing can not.
When a chapter 13 case ends the bankruptcy judge will evaluate the remaining debts that the petitioner owes. Often the repayment plan will pay off a significant amount of the debts owed. Any debts left will usually be discharged unless other disposition methods are requested instead. For certain debts the individual filing for chapter 13 bankruptcy may choose to reaffirm the debt instead. An experienced bankruptcy attorney can offer answers and guidance at every step of the bankruptcy process. These professionals can help you determine which chapter offers the best protection and final results, and even choose the right exemptions for the property and debt types that you have.