PRACTICE AREAS
CHAPTER 7
Chapter 7 Bankruptcy for Individuals
A Chapter 7 bankruptcy wipes out certain debts in order to give the debtor a fresh start. The filer must first pass the means test in order to qualify for filing under a Chapter 7 bankruptcy. The means test provides the bankruptcy court with information about the filer’s monthly income. A filer passes the means test when his or her income is insufficient to pay unsecured debts. Unsecured debts include credit card, medical, and personal debts. If the filer passes the means test, the filer will be allowed to file a Chapter 7 bankruptcy. A note of caution, not all unsecured debts are dischargeable in a Chapter 7 bankruptcy.
Neither alimony nor child support can be discharged by filing a Chapter 7 bankruptcy. Moreover, student loans are largely non-dischargeable, unless the debtor can show undue hardship before the bankruptcy court. The debtor’s non-exempt property may be sold by the bankruptcy trustee and the funds used to pay the debtor’s creditors. However, a debtor’s personal belongings are protected by state and/or federal bankruptcy exemptions. In a no-asset case, nothing is sold and as a result nothing can be paid to creditors.
CHAPTER 13
Chapter 13 Bankruptcy for Individuals
In order to file for bankruptcy under Chapter 13, the debtor must meet certain requirements. There are differences in the outcomes between a Chapter 7 and a Chapter 13 bankruptcy. Under Chapter 7, the debtor gets a discharge of particular debts in exchange for the sale of non-exempt property. As a result, the proceeds from the sale of non-exempt property are used to pay creditors. Filing bankruptcy under Chapter 13 grants a debtor the ability to retain their property. In addition, the debtor agrees to pay back creditors via a repayment plan. The repayment plan transpires over the course of three to five years and must be approved by the bankruptcy court.
CHAPTER 7
Chapter 7 for Businesses