Sometimes it is difficult to know what type of bankruptcy would be in your best interest; here is a quick guide to cover the basics. You should ultimately talk to a bankruptcy attorney to determine the best course of action for your unique situation.
Analysis of Income and Debt
In both Chapter 7 and Chapter 13, your income, assets, debt, and living expenses will be analyzed to determine if you have any remaining disposable income to repay your debt. For Chapter 7, your financial information will be evaluated for the means test to see if your income is less than your state's median. If you have more income than the means requirement, you may have to file Chapter 13 instead.
Credit Counseling and Debtors Education Course
Both Chapter 7 and Chapter 13 require credit counseling to be completed before your bankruptcy will be complete. The first course, you will need to take before you file your bankruptcy paperwork, and the purpose of this course is to give you other options you may not have considered.
The second course required is the Pre-Discharge Debtors Education Course. This course is designed to give you better tools to deal with your finances, so you do not get so far behind again that you file bankruptcy. Both of these courses can be taken online. For more information on how to find a court-approved agency, go to the U.S. Justice Department website (www.usdoj.gov).
The 341 Meeting
Both Chapter 7 and Chapter 13 filers are required to attend this meeting. You, your lawyer, your trustee, and possibly your creditors will attend this meeting. This is an informal meeting that can take anywhere from 10 to 30 minutes. The trustee will ask you questions about your finances and debt and make recommendations to the court to either approve or reject your plan. You will have time to make any changes more in line with what the trustee finds acceptable and fair to all parties.
Only Chapter 13 bankruptcy filers will have to make a pre-approved repayment plan. Usually, Chapter 13 filers have a large amount of secured debt they wish to keep and have fallen behind in payments. Filing a Chapter 13 bankruptcy helps stop any legal action on secured debt such as home foreclosure or vehicle repossession.
Only Chapter 13 filers have a set amount of time to make payments to their creditors. Legally this cannot last longer than five years. You will make one monthly payment to your trustee, and they will distribute it to your creditors.
Both Chapter 7 and Chapter 13 bankruptcy filers will receive a discharge of their case if all the requirements were met. For Chapter 7, this process usually takes three to six months, and your debt will be eliminated. For Chapter 13, it can take three to five years of making payments, and at the end of that time, any remaining unsecured debt will be eliminated.
If you are considering bankruptcy, talk to a Roseville bankruptcy attorney to find out which Chapter of the bankruptcy code would be a better option for your financial situation.