Bankruptcy is a general term for a court procedure that helps businesses and individuals repay creditors while wiping out debt. Bankruptcies can be grouped into two categories: reorganization and liquidation. Among cases, Chapter 13 and Chapter 7 are the most common; most Chapter 7 cases fall into the liquidation category: if a person owns property, it can be taken and sold to repay creditors. Chapter 13 is a reorganization bankruptcy, where debtors can keep the property, but they must follow a repayment plan that lasts up to five years.
Businesses and individuals are eligible for Chapter 7, and a bankruptcy attorney in Lawrence, KS will tell clients that cases usually last six months or less. In these proceedings, some assets are sold to pay off debt. However, unsecured debts are canceled, and according to federal law some assets are exempt. Secured debts are handled differently in Chapter 7 cases where debtors have three choices: they can allow the creditor to repossess property, they can pay the creditor the item’s full replacement value, or they can continue to make payments. In limited circumstances, some secured debts can be discharged in Chapter 7.
Eligibility for Chapter 7
Before a person or business can file for Chapter 7, they must meet certain criteria. To be eligible, a person cannot make enough money to follow a Chapter 13 repayment plan. Certain debts cannot be wiped out during Chapter 7: while unsecured loans and credit card debts can be forgiven, debts such as alimony and child support cannot be discharged.
Sometimes referred to as “the wage earner’s bankruptcy”, only those with reliable income should visit joewlaw.com to learn how to file for Chapter 13. When a case is filed in federal court, the debtor must work to devise and follow a years-long repayment plan. The amount to be paid is based on the debtor’s income, the level of debt, and the amount creditors would have gotten had the client filed Chapter 7.
To be eligible for Chapter 13, a debtor must prove that his or her debt is under the filing limit. The secured debt limit is $1,010,650, and the unsecured limit is $336,900. If the debt exceeds either amount, even a bankruptcy attorney in Lawrence, KS can’t help the client get Chapter 13.
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