The Most Common Types of Bankruptcy Cases
Bankruptcy laws were passed by the government in the United States to make sure people did not spend a lifetime burdened with debt that they had no hope of paying. Because there are many different situations in which people or corporations / companies might need to file for bankruptcy, there are many different types of bankruptcy available. Talk to a Seattle Bankruptcy Attorney or a Seattle Bankruptcy Lawyer to make sure you are filing for the correct type of bankruptcy, such as the attorney’s at Dimension Law Group.
Each of the situations people may find themselves in makes up a “chapter” of the bankruptcy code. For instance, Chapter 12 is the chapter of the bankruptcy code that is used when farmers need to file for bankruptcy protection. While there are many different chapters, most consumers will file for bankruptcy under either Chapter 7 or Chapter 13. Occasionally, consumers with large amounts of debt will also file under Chapter 11.
Because many bankruptcy laws are set on the federal level, these same chapters apply to those filing for Seattle Bankruptcy and Washington State Bankruptcy.
Understanding the Different Types of Bankruptcy
Each of the different types of bankruptcies work differently and cater towards different debtors.
Chapter 7 is a total liquidation bankruptcy that is intended for lower income individuals who do not have the money to pay anything towards the debt obligations they have. The Bankruptcy Abuse and Prevention and Consumer Protection Act of 2005 made it harder to file for chapter 7 to ensure that only those who truly needed to eliminate their debts were eligible to file under this chapter. It is now necessary to qualify for chapter 7 by either making less than your state’s median income (Washington State’s median income was $52,996 for singles in 2013) or by passing a “means” test that calculates your disposable income by subtracting required expenses from your income. When you qualify for chapter 7, you are required to turn over non-exempt assets, which become part of the bankruptcy estate and are sold. Such assets include things such as non-retirement accounts and high value cars or property. Washington State law permits you to apply either their exemptions or the federal ones, but not both. The creditors are paid from the proceeds of your asset sale and any remaining balance on your debt is discharged/forgiven.
Chapter 13 is “wage earners” bankruptcy intended for people who have more money but not enough to pay the debts they currently owe. Debtors get to keep all of their assets, but they have to repay at least some of their debts. Debtors create a repayment plan with a 3-5 year duration where payments are based on what their income is. Creditors must approve the repayment plan. If the debtor follows the plan as required, any remaining debts at the end of the plan are discharged.
Chapter 11 is usually used by businesses, but can also be used by individuals who have too much debt to be eligible for protection under chapter 13. It too requires creating a repayment plan and restructuring the terms of how debts are repaid. Washington State Chapter 11 bankruptcy filings tend to be the most complicated and the most costly of the methods of filing for bankruptcy and are not common in a personal bankruptcy filing.
Filing for Bankruptcy
For more information on which chapter of bankruptcy is right for you and on how the different chapters will impact your debt, contact an experienced Seattle Bankruptcy Attorney or Seattle Bankruptcy Lawyer. The lawyers at Dimension Law Group are experienced in bankruptcy and ready to help. Contact Dimension Law Group today.