A new bankruptcy law went into effect on October 17, 2005. Under the new law it may be more difficult for some people to qualify for relief under Chapter 7of the United States Bankruptcy Code.
Qualifying under Chapter 7 is determined by one's family income, size, and expenses. If the household income is greater than the state median income, it is considered an abuse to file Chapter 7 unless there are mitigating circumstances to justify filing the case.
This plan will not pay back creditors in full; any unpaid balance will be discharged upon completion of the plan.
Chapter 13 for Debtors Above the State Median Income
If the income is above the state median income, the new laws provide a new way to calculate your payment amount. The method used to calculate the payment amount is too complicated to cover in detail here. A full evaluation of your income and expenses is necessary before it is possible to calculate the payment amount.
Chapter 7 is a legal method pursuant to the United States Bankruptcy Code whereby one may obtain relief from creditors without losing his/her exempt property.
Chapter 7 is the most commonly known type of bankruptcy and is often referred to as "complete bankruptcy." Under Chapter 7, a person lists all of his/her debts and assets. Depending on the exemptions allowed, he/she may emerge from the bankruptcy debt-free while keeping all exempt property.
A person may discharge any and all debts that are dischargeable pursuant to the United States Bankruptcy Code. These include most debts other than debts incurred by way of fraud or misrepresentations, or where a false financial statement was provided; most taxes (although there are exceptions); student loans; some types of recent cash advances and some recent credit card purchases; child support and alimony; as well as a few other odd exceptions. A discharge will prevent creditors from ever taking any action to collect, and the debtor gets to keep all his exempt property.
Secured debt where there is collateral requires a debtor to make a choice to either continue to pay to keep the collateral or surrender the collateral to the creditor. A Chapter 7 bankruptcy will not affect a valid lien and the creditor retains the right to payment or collateral.
This is for informational purposes only and should not be substituted for legal advice. You should consult an experienced attorney. Contact us today for your FREE consultation!