Types of Bankruptcies
What are the different types of bankruptcy?
The United States Bankruptcy Code provides for five different types of bankruptcies in KY: Chapter 7, Chapter 13, Chapter 12, Chapter 9 and Chapter 11. Chapter 7 bankruptcy and Chapter 13 bankruptcy are the most common, and can be used for individuals and families.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is a way to eliminate debt with generally no repayment to creditors. It allows an individual to completely get rid of most debt by receiving a discharge from the bankruptcy court at the completion of usually a 90-day process. Some examples of debts that are typically discharged in a Chapter 7 bankruptcy include: credit cards, medical bills, personal loans, old utility bills, payday loans, prior repossession or foreclosure deficiencies, and other types of miscellaneous collections. At the end of your Chapter 7 case, the court may offer a discharge on all or some of your debt, which means you are no longer required to pay the debts that existed prior to filing your bankruptcy.
Although Chapter 7 is referred to as a liquidation, most people that file for Chapter 7 are able to keep most, if not all, of their assets either because of the bankruptcy code exemptions available to protect their basic possessions, or because most people that file for bankruptcy do not have significant equity in their homes or cars. For most clients, we are able to protect all or most of a debtor’s property throughout the bankruptcy process and provide them with a fresh start, free of debt with all or most of their assets retained.
It is imperative to retain experienced counsel in every bankruptcy case in order to ensure that you keep any and all assets that the law allows. Without representation, many people simply do not know how to protect their possessions and end their bankruptcy with a less than favorable result.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is the most common type of bankruptcy. It’s a repayment plan that offers distinct protections under the Federal Bankruptcy Code, allowing a debtor to reorganize debt and pay creditors in monthly payment arrangement. Chapter 13 bankruptcy is often referred to as a “wage earner’s plan” because a successful Chapter 13 requires monthly payments to an appointed trustee. The Court will only confirm a Chapter 13 bankruptcy plan when a debtor can show that regular income or funds are coming into the household to make that monthly payment. The amount to be repaid monthly and the length of repayment vary greatly from case to case depending on the debtor’s income, expenses, and several other factors.
A Chapter 13 plan can restructure certain debts so that the debtor repays often under more favorable conditions, such as lower to no interest rates. Other benefits include the opportunity to remove qualifying liens from secured property, such as second mortgages or home equity lines of credit. In a Chapter 13 repayment plan debtors have the opportunity to keep property that may otherwise not have been protected under a Chapter 7 bankruptcy.
In addition, for people that have fallen behind on their home loan, or car loan, and may be facing an impending foreclosure or repossession, a Chapter 13 may give immediate relief from those threats by making arrangements with those creditors. Finally, a Chapter 13 may give clients an opportunity to resolve past due income taxes, sometimes with no future interest or penalties. It’s important to do this before your wages are garnished, leaving you financially paralyzed. If you have any of these financial concerns, and think that a Chapter 13 may be right for you, time is of the essence and you need to immediately meet with an attorney to discuss your rights and remedies under the law.
Other factors affecting the decision to file a Chapter 13 include the ability to repay debts in the Chapter 13 plan that may not be dischargeable in a Chapter 7 bankruptcy. Examples of these non-dischargeable items include past due child support, taxes and student loans.
Either of these types of bankruptcies in KY can be utilized for individuals and families depending on the need. Louisville bankruptcy attorney, Tracy L. Hirsch, can help you determine which one is best for you. Call her today at (502) 435-2593 to set up your free consultation.
Still Have Questions?
Filing for bankruptcy is a very complex process—and a decision that should never be taken lightly. Tracy L. Hirsch at GSH Law is here to discuss your options and help guide you through the process. Contact Us and let’s start you on the path to a better financial future today.
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