When filing for a bankruptcy one of the most important things is to be aware and informed of all of the different options that you have. There are a few types of bankruptcy, including Chapter 7 and Chapter 13 and they vary when it comes to repaying your debts. There are different requirements to be eligible for these two types.
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy involves the discharge of most or all debts that a person has and this is generally because they do not have the income to repay their debts. A means test is used to determine who is eligible to file under this form of bankruptcy. While this type of bankruptcy rids you of your debts, it also allows a trustee to take the property that you own and sell it in order to pay off your creditors. This can be tricky because the bankruptcy trustee discharges your debts but can liquidate the property that you have and leave you without a home.
Filing for Chapter 13 Bankruptcy
A Chapter 13 bankruptcy on the other hand does not cancel all of your debts, this type of bankruptcy requires you to repay them. The determination of a repayment plan is done by a bankruptcy means test. This test creates a number which is your "disposable income;" there is a six-month period taken into consideration and the disposable income is your income in six months with your expenses deducted. The amount that you have to spare after expenses is the factor that determines if you will be able to pay back your debts.
In order to qualify for a Chapter 13 bankruptcy you must:
- Have a consistent regular income
- Not have over $360,475of unsecured debt
- Not have over $1,081,400of secured debt
- Complete a credit counseling course
- Not have a dismissed bankruptcy that was dismissed within 180 days
If you are eligible for a Chapter 13 bankruptcy, you will be put on a 3-5 year plan in which you will pay back a certain percentage to your creditors. The bankruptcy process can be intricate and confusing which is why it is important to seek experienced legal counsel by calling a Chicago bankruptcy lawyer who can assist you through every step of your bankruptcy.