BANKRUPTCY
If you are having financial difficulties and cannot pay your debts then bankruptcy
may or may not be the answer for you. Sometimes there are non-bankruptcy alternatives
which are feasible to the debtor. Only an experienced bankruptcy attorney
can properly advise you and help you make the right decision for you. I'm
experienced in representing clients for both Chapter 7 and Chapter 13 bankruptcies.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)
made a major legislative overhaul of the bankruptcy law as based on the previous
bankruptcy Reform Act of 1978. This resulted in bankruptcy lawyers having
to scramble to learn a great body of new law of which much remains to be interpreted
by jurisprudence(case opinions).
CHAPTER 7
The Chapter 7 bankruptcy is a way for debtors to get a fresh start and have their debts eliminated. This type of bankruptcy is also referred to as “straight bankruptcy” or “liquidation bankruptcy” because the debtor's non-exempt assets will be liquidated by the trustee in order to pay off as much of the debt as possible. For debtors who are incapable of repaying debts and satisfy the requirements for filing a Chapter 7 bankruptcy, this type is the most common option. It will prevent harassing phone calls from creditors, eliminates most debt and reduces much stress associated with debt collection.
Both individuals and business entities can file for Chapter 7 bankruptcy protection if they satisfy certain requirements including, some of the following: a) have income within a threshold determined by the so-called means test which considers many factors; b) have current status on income tax return filing; and c) must complete a pre-filing credit counseling session.
The downside of filing a Chapter 7 bankruptcy include: the debtor might lose every piece of property owned except for what is allowed exempt status; there are certain debts classified as priority or non-dischargeable which will not receive the benefit of a discharge; any guarantors/cosigners of the debtor's home loan might end up having to pay any balance; a debtor can only file for Chapter 7 relief once every eight years; and the debtor's credit score will be negatively affected.
CHAPTER 13
The Chapter 13 bankruptcy is often referred to as the"wage earners bankruptcy." Under Chapter 13, unlike Chapter 7, assets are not liquidated to pay off creditors. The debtor submits a repayment plan to the bankruptcy court, which if approved, allows the debtor to pay his disposable income to the bankruptcy trustee for payment of the debts in accordance with the terms of the plan.
Employed individuals, or self employed operating an unincorporated business, can file for Chapter 13 bankruptcy protection if certain requirements are satisfied, including, but not limited to the following: a) before the confirmation of a plan, the debtor must certify that all post-petition domestics and support obligations have been made; b) prior to confirmation of the plan, the debtor must have filed all applicable federal, state and local tax returns for the most recent pre-petition four years, in which such returns are required; c) must complete a pre-filing credit counseling session; d) no prior bankruptcy petition was dismissed in the previous 180 days due to debtor’s failure to appear in Court.
In order to qualify under Chapter 13, debtor must have “regular income,”
which is defined as income sufficiently stable and regular to enable a debtor
to make payments under a Chapter 13 plan. If a person is unemployed or otherwise
devoid of regular income, a Chapter 13 case may not be feasible. Chapter 13
cases normally last from 3 to 5 years, with a discharge granted at the close
of the case. In Chapter 13 cases, the attorney’s fees and administration expenses
tend to be considerably more than in Chapter 7 cases. If a person is not able
or willing to make meaningful payments and otherwise comply with a Chapter
13 plan during the entire duration of the plan and to bear the additional
expenses involved, Chapter 13 is probably not advisable for that person. Also,
if anything is likely to occur during the duration of the case that would
diminish or eliminate the person’s ability to make payments under a plan,
then a Chapter 13 case may not be advisable.