Filing For Bankruptcy
Virtually anyone can file for bankruptcy in this country. The question is, which kind of bankruptcy? The answer depends on what types of debts you have that you can’t pay and what you want to accomplish by filing bankruptcy.
Chapter 7 is by far the most popular type of consumer bankruptcy, accounting for somewhere around 75% of all bankruptcies filed in the US. Chapter 13 is a distant second.
Perhaps surprisingly, given the pandemic and accompanying economic downturn, 2020 saw the lowest number of bankruptcies filed in the past five years: 378,953 Chapter 7s and 156,377 Chapter 13s respectively.
Even though bankruptcy is a federal court procedure, each state has its own Chapter 7 qualifications. Called the means test, your annual adjusted net income must be equal to or below your state’s median income for a family of your size.
Once you qualify, however, Chapter 7 is fairly simple, straightforward, and takes only 2-4 months to complete. Basically, you list your consumer debts and the court discharges them after liquidating some of your nonexempt property to pay other of your debts. But don’t fear that you’ll “lose everything” in a Chapter 7 bankruptcy. You won’t. A good number of your assets are exempt from liquidation. Your bankruptcy lawyer can advise you on this issue.
The Chapter 13 qualifications don’t assess your income, although you must have a regular income. Instead, they assess the amount of your debt. To qualify for Chapter 13, you cannot have more than $1,257,850 in secured debt and $419,275 in unsecured debt. Other qualifiers include the following:
- You must be current on your income tax filings.
- You must not have filed for Chapter 13 in the preceding two years or for Chapter 7 in the preceding four years.
- You must not have filed for either Chapter 13 or Chapter 7 within the preceding 180 days and had your petition dismissed for certain reasons.
Once you qualify, you have the opportunity to meet with your secured creditors to renegotiate your respective debts with them. It’s not unusual for you to achieve balance reductions or lower interest rates through these renegotiations. Then you, with the help of your bankruptcy lawyer, like from the Law Offices of Ronald I. Chorches, and the bankruptcy trustee, devise a 3- or 5-year repayment plan to catch up on your renegotiated debts and pay them down substantially or even totally off. At the end of your bankruptcy period, you continue paying the remainder of your secured debts and the court discharges your unsecured debts.