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What Is Bankruptcy?
Not everyone can file for Chapter 7 bankruptcy. For example, if your disposable income is sufficient, after subtracting certain allowed expenses and monthly payments for certain debts (including child support and debts that secure property), to fund a Chapter 13 repayment plan, you won't be allowed to use Chapter 7. For more on this and other requirements, see Who Can File for Chapter 7 Bankruptcy? For more information on Chapter 7 bankruptcy generally, see An Overview of Chapter 7 Bankruptcy.
Bankruptcy doesn't work on some kinds of debts. Though bankruptcy can eliminate many kinds of debts, such as credit card debt, medical bills, and unsecured loans, there are many types of debts, including child support and spousal support obligations and most tax debts, that cannot be wiped out in bankruptcy. For more information, see What Bankruptcy Can and Cannot Do.
Reorganization (Chapter 13)
Chapter 13 bankruptcy is also known as "wage earner" bankruptcy because, in order to file for Chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt. And to qualify for Chapter 13, your secured debts must be less than $922,975 and your unsecured debts less than $307,675.
When you file for Chapter 13 bankruptcy you propose a repayment plan that details how you are going to pay back your debts over the next three to five years. The minimum amount you'll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you'd filed for Chapter 7.
If you have secured debts, Chapter 13 gives you an option to make up missed payments to avoid repossession or foreclosure. You can include these past due amounts in your repayment plan and make them up over time.
FAQs
- A bankruptcy filing could remain on my credit record for up to 12 years. How will that affect my future finances?
- What about if I file under Chapter 13-how can I keep my home then?
- When should I consider bankruptcy as an option?
- What are my chances of getting credit after declaring bankruptcy?
- I am going to declare bankruptcy. What are the chances I can keep my home?
Bankruptcy and Debt Resources
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