Bankruptcy

Which bankruptcy do I want?

What Bankruptcy chapter do I need? Before you can answer this question, you must first determine which chapter you can qualify to use. To do this, we must average your household's gross average income for the last 6 months, not including the income for the month that you file your case (example: if you file your case sometime during the month of April, we have to average your gross income for the months of October through May). This average is compared to the average income the IRS believes a family of your families size makes in your county. As long as your family income average for the last 6 mons is less than the IRS average income in your county, you are not deemed to have committed "abuse" of the system, and are able to continue looking at either Chapter 7 or the shortest version of Chapter 13. If your average income for the 6 months immediately preceding the month you file your case is higher than the average income for your family size in your county, you are considered to be an "above-median debtor" and you will be forced into a Chapter 13 case that lasts for 5 years.

Chapter 7

If you are eligible to file a Chapter 7 bankruptcy, you will not lose everything you own. It does not always result in the loss of your car or the loss of your house. In fact, the vast majority of debtors in Chapter 7 bankruptcy are able to keep their cars and house if the case is filed early in your financial troubles when you are still current on the secured payments. Even if you are behind in your payments to your secured creditors, specifically for auto debts, you still have options under Chapter 7 to keep the car. If those options under Chapter 7 will not allow you to keep your car or other secured property, a Chapter 13 may be the best option for you.

Chapter 13

Since almost everyone is eligible to file some form of Chapter 13, either the shortest version for debtors that have below-median income or the longer version for debtors that have above-median income, you need to understand that you will be required to file a Chapter 13 Plan and pay at least some of your debts. These payments are made to the Chapter 13 Trustee for distribution in accordance with bankruptcy law. While most people think that they want the shortest (and initially cheapest) version of bankruptcy, this is not always the best option in this economy. Chapter 13 bankruptcy has great benefits for debtors that are upside-down on their cars (if they have had the loan for 910 days or more), and excellent benefits for debtors that have 2 or more mortgages and the fair market value of their home is less than what is owed to the first mortgage.

Chapter 11

Chapter 11 cases are usually filed for businesses needing to restructure their debts.  They can also be filed by individuals, if your needs are not properly protected by a Chapter 13.

Contact us today to learn more about your options under the current bankruptcy laws. We're here to help.

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