Most people know that there are certain “chapters” of bankruptcy, but are less clear on what that means. The idea is actually pretty basic, the chapters refer to the actual chapter of the bankruptcy law. So a Chapter 7 case is simply one that follows the rules of chapter 7 of the Bankruptcy Code and a Chapter 13 case follows the rules of chapter 13. Once you understand the terminology used to define what type of case you are filing, you can then start to learn the differences between the two. The main difference is that a Chapter 7 lasts only a few months, and a Chapter 13 can last up to 5 years. Another big difference is that in a Chapter 7 you can wipe out all of your unsecured debt, but that is not an option in a Chapter 13. This rule makes most people want to file a Chapter 7, but the chapter you file is not entirely your choice.
Once the decision to file bankruptcy has been made, your attorney will then perform a complex mathematical computation to determine which chapter you are eligible to file. The calculation is called the means test, and here is a quick overview of how it works:
• Your income is examined in comparison to your secured debt.
• If you have any disposable income left over after meeting all of your secured obligations, you will qualify for a Chapter 13.
• If you do not have enough money to even pay all of your secured debts, you can file a Chapter 7.
The test looks at your income over the past several months, so you will need to come to your attorney meeting with your paystubs in hand. You will also need to know what your bills add up to each month, and have those debts classified by type; secured or unsecured. Once your data has been analyzed, we will let you know what chapter of case you can file. We will also explain each step of the process along the way, so you are comfortable with how your case is progressing.
For more information about bankruptcy, contact us today at www.DsouzaLegalGroup.com. We will go over the facts of your case and let you you’re your next step.