What is the main difference between Chapter 13 and Chapter 7?
There are many differences, but probably the main difference is that in Chapter 13 you get to keep your property as long as you are adhering to the repayment plan. In other words, Chapter 13 is not a liquidation bankruptcy like Chapter 7, where much of the debtor's assets (if there are any) are liquidated. Consumers who file Chapter 13 pay their debtors out of their future income instead of their liquidated assets.
What are some advantages of filing Chapter 13 versus filing for Chapter 7?
There are many advantages to each form of bankruptcy. The Chapter 13 advantages are: the retention of most assets, it can be filed more frequently, and it is more likely that you will keep your home. Some Chapter 7 advantages are that the cases are quicker (months as opposed to years), the discharge of nearly all debts and it is a much better option for those with few assets. Often it is best to consult with an attorney well versed in bankruptcy law to determine the best option for consumers.
How does a Chapter 13 case begin?
As with a Chapter 7 petition, a consumer must complete a credit counseling course within 180 days of filing a bankruptcy petition. The consumer must then fill out a packet of forms similar to a Chapter 7 consumer. The difference is that the Chapter 13 consumer must come up with a workable plan to repay some of his or her debts over a three- to five-year period. The consumer must also include proof of paying income taxes and provide the most recently IRS tax return as well.
Chapter 13 petitioners must file their planned repayment schedule within 15 days of filing their petition. The repayment plan is based on the disposable income of the petitioner.
What types of consumers must file for Chapter 13?
Those consumers with higher incomes usually must opt for Chapter 13, because they don't pass the "means test." Those who have an income level higher than their state median income level generally must file for Chapter 13.
How long do Chapter 13 cases last compared to Chapter 7 cases?
Chapter 13 cases last much longer than Chapter 7 cases. The typical Chapter 7 cases lasts only about 4 to 6 months, while Chapter 13 cases last three to five years.
What eligibility requirements are there for Chapter 13?
A consumer-debtor must not have more than $336,900 in unsecured debt and have less than $1,010,650 in secured debt in order to file Chapter 13.
Do prior bankruptcy filings affect eligibility to file other bankruptcy petitions?
Yes, there are time limitations. An individual is ineligible for a Chapter 13 discharge if he or she has had a previous Chapter 13 case in the past two years or a Chapter 7 case in the past four years. You cannot file a Chapter 7 petition if you have had a previous Chapter 7 case in the past eight years.
What is disposable income?
Disposable income refers to whatever is left over from your total income after you have paid for taxes and reasonable and necessary living expenses, as determined on a monthly basis. This is arguably the most important calculation in Chapter 13 cases, as this determines how much money you will repay and how much money you will have for regular living expenses. The Bankruptcy Code defines "disposable income" as follows:
For purposes of this subsection, the term "disposable income" means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended....