In a bankruptcy case, you (the debtor) are asking the judge to grant you a discharge of all of your dischargeable debt, in exchange for you providing all of the required information for the judge and trustee to evaluate (along with you and your attorney) and if you fit into the guidelines of the means test for income and expenses and you do not own any assets that are non-exempt in bankruptcy. In that case, you would qualify for a no-asset Chapter 7 bankruptcy. Otherwise, if you exceed the median income, or, you own an asset that is non-exempt (and you want to keep it), you would be required to complete a Chapter 13 payment plan. In some instances, there are some assets for the trustee to
administer in a Chapter 7 bankruptcy case.
Bankruptcy Information Sheet
Here is a link to the US Trustee's website where they provide you with the “bankruptcy information sheet” that the trustee will always ask about in every bankruptcy creditor's meeting they hold. If you are really interested in bankruptcy, I recommend you to check out the information provided by the US Trustee. This form is always handed out at our initial bankruptcy consultation.
Bankruptcy Chapter 7
Chapter 7 bankruptcy is the way most people would opt to go, if forced to choose between bankruptcy options. The reasons for this have mostly to do with the complexity of the Chapter 13 and the obligations a Chapter 13 brings with it, such as monthly payments and no gambling or borrowing money. The Chapter 7 is relatively simple in comparison and lasts only 3-4 months and involves no monthly payments to the bankruptcy trustee.
Chapter 7 Bankruptcy – Basics on Asset versus no-Asset Cases
Most of the cases we file are no asset Chapter 7 bankruptcies, which means that the debtor is truly insolvent and the trustee/creditors do not get any money out of the bankruptcy case. One of the most common exceptions to the no-asset rule, are the cases where people (debtors) receive a large tax refund during the bankruptcy case. Sometimes, the bankruptcy trustee will be entitled to take some or all of your tax refund in order to benefit your creditors (these are things that can be planned around in the
beginning of the case, also.
Chapter 13 Bankruptcy
The most common way debtors get involved in Chapter 13 is usually because the debtor has income above the median income level for the State of Missouri and no extraordinary expenses to lower their funds available for unsecured creditors. The other common way to get into a Chapter 13 is because you own a non-exempt asset (usually too much equity in your home – Missouri law only allows you $15,000 as exempt). If you have a non-exempt asset, and you want to keep it through bankruptcy, you can end up buying back your own asset from the bankruptcy trustee.
The Chapter 13 bankruptcy can go anywhere from 3 to 5 years on the payment plan. If your income exceeds the median income, then your plan must go for 5 years. Chapter 13 plan payments are usually not as burdensome as some might imagine. If you have your car financed, you have \to pay it through the plan (with few exceptions). If you have an arrearage on your home mortgage payments, you have to pay that back through the plan in order to keep your house. Usually, that would also require you to pay your house payment through the plan payment, as well.
So, the Chapter 13 ends up looking somewhat like a debt consolidation loan that will be paid off within five years. You have to pay for your secured loans (if you are keeping the collateral) and you usually pay something towards the unsecured creditors.