There are two kinds of bankruptcy:

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Chapter 7: Eliminating consumer debt (credit cards) while keeping your car and home

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Chapter 7 is a liquidation bankruptcy that wipes out most of your general unsecured debts such as credit cards and medical bills without the need to pay back balances through a repayment plan. To qualify for Chapter 7 bankruptcy, you must meet income requirements called a “means test.” If you make too much money you will have to file under Chapter 13 bankruptcy.

 

When you file for Chapter 7 an “automatic stay” is issued by the court that immediately stops most creditors from pursuing collection efforts. A bankruptcy trustee is appointed to administer your case. In addition to reviewing your bankruptcy papers and supporting documents the Chapter 7 trustee’s job is to sell your nonexempt property (property that you can’t protest with a bankruptcy exemption – we claim exemptions for you on the bankruptcy petition) to pay back your creditors. If you don’t have any nonexempt assets your creditors receive nothing. Most Chapter 7 filings are what they call “no asset” or “no distribution” cases.

 

Chapter 13: Reorganize your debt over time under a supervised plan while still receiving a discharge

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Chapter 13 is a reorganization bankruptcy designed for debtors with regular income who have enough left over each month to pay back at least a portion of their debts through a repayment plan. Even though most Chapter 13 filers make too much money to qualify for Chapter 7 bankruptcy many debtors choose to file for Chapter 13 bankruptcy because if offers many benefits not available in Chapter 7, such as the ability to catch up on missed mortgage payments or strip wholly unsecured junior liens from your house.

 

In Chapter 13 bankruptcy you get to keep all your property including nonexempt assets – however you’ll have to pay creditors an amount equal to the value of your nonexempt property. In exchange you pay back all or portion of your debts through a repayment plan. The amount you must pay back will depend on your income, expenses, and type of debt.

 

JW Bearden & Associates can help you determine if filing for bankruptcy is right for you, what kind of bankruptcy filing would be best for you, and what your rights are moving forward. For an initial case evaluation, call 214-396-7622 (Dallas) or 504-930-4330 (New Orleans). Or send an email using our secure online form.