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Fresh Start – Chapter 7

Filing a case with the US Bankruptcy Court under the Chapter 7 provisions is typically the fastest way for an individual to cancel his or her financial obligations. This includes but is not limited to: credit card debt; medical bills; a second mortgage or home equity line of credit deficiency; car loans; back taxes or other debts.  A Chapter 7 case should last no more than three (3) months from the date that the case is filed with the Court.

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Chapter 7 Overview

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One of the preliminary issues that we address with our prospective clients is whether a person qualifies for Chapter 7 under the “means test” that was adopted as part of the changes to the Bankruptcy Code in 2005. The majority of our clients qualify for Chapter 7 because their income is below the “median income” yet have ongoing secured debt payments such as a home mortgage or car payments, or other circumstances that are beyond their means to debt service.

The filing of a Bankruptcy case invokes what is known as the “automatic stay”.  The automatic stay puts an immediate halt to virtually all creditor harassment and collection actions.  The Bankruptcy Code ensures an immediate stop to: all foreclosure activities (including the sale or auction of one’s home or other real property); harassing telephone calls by bill collectors; wage garnishments; all further collection actions involving other lawsuits; and, levies on bank accounts.  The automatic stay remains in place until you receive your discharge or a creditor obtains a further order of the Bankruptcy court

Approximately three (3) months after the commencement of your case, the Court enters its “Order of Discharge”.  The discharge operates as a cancellation of the client’s personal responsibility and liability of his or her debts, with certain exceptions such as child support and student loans.  Having successfully completed a Chapter 7 case, the client is then able to re-build his or her credit immediately and realize a “Fresh Start” and new beginning.

Our clients often report that he or she have qualified for new credit cards or was able to purchase a new vehicle within one year from the start of the case.  Under the guidelines of the Federal Housing Administration (“FHA”), a client can qualify for a mortgage to purchase a new home in three (3) years following the completion of his or her Chapter 7 case (or two (2) years after a Chapter 13 case). Private Lending institutions or Banks often will qualify buyers sooner depending upon their work history and income.

Debt ReliefWhen the Court enters your discharge, your case is effectively completed. The import of receiving your discharge is the comfort of knowing that your debts are forever cancelled and creditors can no longer attempt to collect on the debts; otherwise, they will face severe sanctions pursuant to federal law. In this way, our clients can begin to rebuild their financial health without fear of further harassment.

While Chapter 7 has been an option for decades, Congress amended the Bankruptcy Law in 2005 to make it more difficult for individuals with high incomes to obtain Chapter 7 relief.  While that change has made it more challenging in certain cases, we provide a detailed analysis of a client’s income and allowable expenses to ensure that a client seeking relief under Chapter 7 succeeds in doing so.

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Debts Under Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a practical way to offer debt relief to Americans in unsustainable financial situations, regardless of how they got there. Up to millions of people each year declare Chapter 7 bankruptcy. It can be especially useful for people who have a lot of unsecured debts like credit cards, medical bills, and personal loans.

The individual filing for a Chapter 7 bankruptcy is allowed to keep certain types of exempt property. In most cases, liens (such as home mortgages and car loans) survive. The amount of exempt property that can be claimed varies from state to state. Other assets, if any, are liquidated (sold) by the Chapter 7 bankruptcy trustee to repay creditors. Although many sorts of unsecured debt will be legally discharged by Chapter 7 bankruptcy information, there are still some types of debt that will not be discharged in a Chapter 7.

Common debts that will not be discharged in a Chapter 7 bankruptcy include:

  • Income taxes less than 3 years old
  • Back and future child support
  • Student loans (unless the debtor prevails in an adversary proceeding brought to decide the discharge ability of the student loan)
  • Property taxes
  • Restitution and fines imposed by a court for any crimes perpetrated by the debtor.
  • Spousal support
  • Property settlement through a divorce
  • Even though these debts are probably not dischargeable, all debts have to be listed on the bankruptcy schedule.

Credit Card Debt

Credit card debt is one of the most common reasons why most people think about filing for Chapter 7 bankruptcy. It’s easy to get into credit card debt especially when the economy is bad. Fortunately credit card balances are among the easiest types of debt that can be eliminated in a bankruptcy case.

The best way to avoid problems with credit card companies is to be honest with your credit card use. Stop using your credit cards right now if you’re seriously considering bankruptcy. Do not try to max them out Bankruptcy is meant to help you get a “Fresh Start”.  It’s best to stay informed and talk to a professional.

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What Is Bankruptcy Under Chapter 7 Means Test?

How to Qualify for Chapter 7 Bankruptcy Means Test?

Bankruptcy is a drastic situation where homeowners or car owners come under direct scanner from their respective lenders. Chapter 7 bankruptcy is amongst the most prominent chapters laid under the BAPCPA, which is the new Bankruptcy law, and hence Chapter 7 was modified in the form which is available as Chapter 7 Means Test. The purpose of modification seemed to be quite necessary as the Chapter 7 Bankruptcy was being abused by many in its present form. The good thing to know out here is that all people who earlier qualified for Chapter 7 Bankruptcy will easily qualify for Chapter 7 Means Test. What’s more, in case you are having huge business debts on your head.

You can qualify for this new means test:

  • If your “Current Monthly Income” is lying below median income level of the household size of your state, even then you qualify for the Chapter 7 Test.
  • Here the term “Current Monthly Income” would mean the monthly average accrued over the past six months. In case your average monthly income in the last six months is above the median, then you have to deduct the allowable expenses using a complex calculation formula.
  • If at the end of applying the formula you find yourself with money which is left over top pay to the creditors even after deducting the allowable expenses you fail the eligibility of mean test.

You can seek Chapter 7 Bankruptcy Information from the Federal government’s website. Browsing through the website will provide you with the detailed information on the norms, terms and conditions

Get ready to avail benefits under the Test which is the result of BAPCPA -the new Bankruptcy law. Chapter 7 Means Test is the new and modified version of the Bankruptcy law envisaged under the BAPCPA. The purpose is to prevent people from abusing the terms and conditions written under Bankruptcy law. With the modified Chapter 7 bankruptcy, it has become quite easy to apply for the bankruptcy and get the best way out from the losses that have incurred in your business. Make sure that you understand all the written protocols in order to secure the benefits provided under this new bankruptcy law.

Make sure that you study the Chapter 7 Bankruptcy Requirements in detail. For this purpose you need to hire the services of bankruptcy attorney and discuss your eligibility requirements. You can also look for Nolo Means Test Calculator online to find the details.

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The Bankruptcy Means Test

Are You Eligible for Chapter 7 Bankruptcy?

If you’re looking for an easy way to determine your eligibility under the Chapter 7 means test, use the Nolo online means test calculator, created by the author of Nolo’s book,  “How to File for Chapter 7 Bankruptcy”, Albin Renauer, J.D. Once you enter your zip code, the calculator uses the applicable income and expense standards for your state, county, and region to determine your eligibility.

You’ll have to supply some income and expense information, but the calculator will save you the trouble of looking up income and expense figures for your area and doing the math. And, if you decide to file for Chapter7 bankruptcy, you can use these figures on your official paperwork (the calculator closely follows the format of the means test form, Official Form 22A, that you must complete when you file for bankruptcy).

The bankruptcy “means test” determines whether your income is low enough for you to file Chapter 7 bankruptcy. It’s a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. High income filers who fail the means test may use  Chapter 13 bankruptcy  to repay a portion of their debts, but may not use Chapter 7 bankruptcy to wipe out their debts altogether.

However, having to take the Chapter 7 means test doesn’t mean that you must be penniless in order to use Chapter 7 bankruptcy. You can earn significant monthly income and still qualify for Chapter 7 bankruptcy if you have a lot of expenses, such as a high mortgage payment. This article discusses how to use our online means test calculator to determine whether you can pass the means test — and, therefore, file for Chapter 7 bankruptcy.

How Does the Chapter 7 Means Test Work?

The means test was designed to limit the use of Chapter 7 bankruptcy to those who truly can’t pay their debts. It does this by deducting specific monthly expenses from your “current monthly income” (your average income over the six calendar months before you file for bankruptcy) to arrive at your monthly “disposable income.” The higher your disposable income, the more likely you won’t be allowed to use Chapter 7 bankruptcy.

Only bankruptcy filers with primarily consumer debts, not business debts, need to take the means test. To take the means test, you must first determine whether your income is more or less than the median income in your state. If you earn more than the median, you must figure out whether you would have enough left over, after subtracting certain expenses, to repay some of your debt.

Is Your Income More Than the Median?

The first step is simple: If your current monthly income is less than the median income for a household of your size in your state, you pass. Period. You’re done. You do not need to complete the rest of the means test. You can file for Chapter 7.

Do You Have Enough Disposable Income to Repay Some Debts?

For those whose household income exceeds the state median, the means test computations get significantly more complex. You must determine whether you have enough income left over (called “disposable income”), after paying your “allowed” monthly expenses, to pay off at least a portion of your unsecured debts (such as credit card bills). If your disposable income adds up to more than a certain amount, you fail the means test and cannot file for Chapter 7 bankruptcy.

Median income levels vary by state and household size, and each county and metropolitan region has different allowed amounts for categories of expenses: basic necessities, housing, and transportation.

If You Pass the Chapter 7 Means Test

Just because you qualify under the means test does not necessarily mean you should file for Chapter 7 bankruptcy — merely that you can. Any decision to file for Chapter 7 bankruptcy should be made only after considering alternatives and other factors discussed with an Attorney.

If You Don’t Pass the Chapter 7 Means Test

If you don’t pass the means test, you are limited to using Chapter 13 bankruptcy, which requires you to make monthly payments over a five-year period according to a strict budget monitored by the court. Most people who file for bankruptcy prefer Chapter 7, which requires no repayment. However, Chapter 13 bankruptcy is still the best way to handle specific types of problems, like curing a default on a mortgage.

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Your Home in Chapter 7 Bankruptcy

What happens if you own a house and file for Chapter 7 bankruptcy?

Whether Chapter 7 bankruptcy makes sense when you own a home depends on your goals — do you want to save your house, delay foreclosure, or just walk away with less debt? Most Chapter 7 bankruptcy filers can keep their homes as long as they are current on their mortgage payments. A few lose their home if they have significant equity that can be used by the trustee to pay unsecured creditors. For those planning on walking away from the home, Chapter 7 bankruptcy can delay foreclosure for a short period of time.

Can I Keep My Home?

You will be able to keep your home in Chapter 7 bankruptcy if you have no equity in the house or you are able to exempt (protect) whatever equity you do have in your home, using the homestead exemption (discussed below). If this is the case, the bankruptcy trustee cannot sell your home to pay unsecured creditors because there would be no money to distribute.

However, it is important to distinguish between losing your home in bankruptcy (which happens when the bankruptcy trustee sells your home to pay unsecured creditors) and losing your home outside of bankruptcy (that is, through the normal foreclosure process). If you are behind on your mortgage payments, you will eventually lose your home in foreclosure outside of the bankruptcy process, even though the bankruptcy trustee does not sell your home as part of the bankruptcy.

If You Are Behind on Your Mortgage

If you file for Chapter 7 bankruptcy and want to keep your home, you must keep making your mortgage payments. In most cases, the bankruptcy trustee will not sell your home (see “Will You Lose Your Home in Bankruptcy?” below), but once the bankruptcy is complete, the normal foreclosure process will proceed. (Or, if the lender is able to lift bankruptcy’s automatic stay, discussed below, the foreclosure process could start before the bankruptcy is over.) That would mean that you’d lose your home outside of the bankruptcy process, through foreclosure.

If you have a mortgage arrearage and want to save your home, consider Chapter 13 bankruptcy, which can allow you to pay off the arrearage through the bankruptcy. (To learn how Chapter 13 bankruptcy affects your home, see Your Home in Chapter 13 Bankruptcy.)

Negotiate With Your Lender Before Filing for Chapter 7 Bankruptcy

If you are behind on mortgage payments, you may be able to negotiate with the lender to deal with the shortfall, either informally or through a more formal “mortgage workout” where the lender agrees to renegotiate payments terms by modifying the loan or refinancing. If you go this route, complete the loan modification before you file for bankruptcy. Otherwise, the bankruptcy will likely disrupt any ongoing negotiations. (To learn about negotiating with your lender or modifying your loan through new government programs, see How to Avoid Foreclosure.)

Will You Lose Your Home in Bankruptcy?

Even if you are current on your mortgage payments and can continue to make them in the future, you may still lose your home if the bankruptcy trustee is allowed to sell it. If you have significant nonexempt equity in your home, the Chapter 7 bankruptcy trustee may attempt to sell your home in order to pay off some of your unsecured debt. However, most Chapter 7 bankruptcy debtors don’t have enough nonexempt equity to trigger a sale, which means most debtors can keep their homes in bankruptcy. To determine if the bankruptcy trustee is likely to sell your home, go through this two-step process:

Step One: Determine the Amount of Your Homestead Exemption. The laws of most states allow homeowners to protect a certain amount of the equity in their home from creditors — this is called the homestead exemption. To figure out the amount of your homestead exemption, you must determine which set of exemptions apply to you. There is a federal homestead exemption (which can be used only in some states), and most states have a homestead exemption amount (usually based on dollar value, but some states limit the amount of acres you can protect from creditors). Which exemption you can use depends on where and when you bought the home, whether the state where you are filing allows use of the federal exemptions, and whether you have moved within the last few years. To learn the details of the homestead exemption amounts, consult with our attorney.

Step Two: Is There Enough Unprotected Equity In Your Home to Trigger a Sale? Next you must determine if you have enough nonexempt equity (equity not protected by the homestead exemption) in your home to trigger a sale in bankruptcy. Start with the market value of your home and subtract the following:

  • The amount of homestead exemption you are entitled to claim (usually between $10,000 and $100,000)
  • The trustee’s commission on the difference (25% of the first $5,000, 10% of the next $50,000, and 5% of the rest, up to one million)
  • The costs of sale (usually around 8% of the market value)
  • The amount owed on all mortgages, and
  • The amount of all nonmortgage liens secured by the home (such as a tax lien).

If you end up with a negative number, you do not have sufficient equity to trigger a sale. This essentially means that the Chapter 7 bankruptcy trustee will have no incentive to sell your home, since there won’t be anything leftover to be used to pay the unsecured creditors.

If you end up with a positive number, this is the amount of equity that the bankruptcy trustee could use to pay your unsecured creditors. In this case, the Chapter 7 bankruptcy trustee may sell your home, give you the amount of the homestead exemption, pay off mortgage and lien holders, and use the rest to pay off unsecured creditors.

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Credit Impact Under Chapter 7 Bankruptcy

Unlike a chapter 13 bankruptcy, which will stay on an individual’s credit report for 7 years from filing date of the petition for chapter 13, a Chapter 7 bankruptcy filing will stay on an individual’s credit report for 10 years from the filing date of the petition for Chapter 7. Because of this, credit can become more difficult to obtain and/or terms on credit will often be less favorable, just as though the individual has a high credit to debt ratio. However, that should be balanced against the elimination of actual debt from the Debtor’s credit record by the bankruptcy, which tends to increase creditworthiness. However, creditworthiness and consumer credit is a complicated subject. Further capacity to acquire credit is dependent on many factors and can be difficult to predict.

Another item to take into account is whether the bankruptcy filer can avoid a challenge by the U.S. Trustee to his or her Chapter 7 bankruptcy filing as abusive. One factor in taking into consideration whether the U.S. Trustee can prevail in a challenge to the filer’s Chapter 7 bankruptcy filing is whether the filer can otherwise obtain the money needed to repay some or all of his or her debts out of disposable income in the five year period to do so provided by a Chapter 13 bankruptcy. In this case, the U.S. Trustee may be successful in preventing the filer from getting a discharge under Chapter 7, thereby forcing the filer into Chapter 13.

It is widely maintained amongst bankruptcy attorneys that the U.S. Trustee is becoming far more aggressive in recent years in going after (what the U.S. Trustee regards to be) abusive Chapter 7 bankruptcy filings. By means of these activities the United States Trustee has attained a regulatory system that most creditor-friendly commentators and Congress have consistently embraced, i.e., a formal Chapter 7 means test. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 clarifies this area of concern by instituting changes to the U.S. Bankruptcy Code that incorporate, among many other reforms, language establishing a bankruptcy means test for Chapter 7 cases.

Creditworthiness and the probability of getting a Chapter 7 discharge are just two of several issues to be taken into account when deciding whether to file for bankruptcy. The significance of the effects of filing for bankruptcy on consumer credit and creditworthiness is sometimes overstated because by the time that most debtors are prepared to file for bankruptcy their credit score is probably already ruinous. Also, new lines of credit offered after the petition are not part of the bankruptcy discharge, so creditors often offer new credit lines to the newly-bankrupt.

To determine if you are eligible for filing Chapter 7 bankruptcy, the bankruptcy attorney will complete several proceedings listing your assets, debt, income, and expenses, as well as other documents on your behalf. There is also a bankruptcy means test that evaluates your income compared to expenses and places a limit on those who can file based on their income. The amount of your debt is not a determining factor. There are limits placed on those that have filed for bankruptcy in the past and also a mandatory credit counseling class that must be completed before filing.

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When Chapter 7 Bankruptcy Isn’t the Right Choice

Determine if Chapter 7 bankruptcy is a good option for you.

Before you file for Chapter 7 bankruptcy, decide if it makes financial sense. You can determine if Chapter 7 is right for you by asking yourself the following questions:

  • Are you judgment proof — that is, are creditors legally barred from taking your property or income even if you don’t file for Chapter 7 bankruptcy?
  • Will Chapter 7 bankruptcy discharge enough of your debts to make it worth your while?
  • Will you have to give up property you really want to keep?

Depending on your answers to these questions, you may find out that Chapter 7 bankruptcy won’t help much or, in the alternative, that it is a good choice for you.

Are You Judgment Proof?

Most unsecured creditors are required to obtain a court judgment before they can start collection procedures, such as a wage garnishment or seizure of personal property. (Collections for taxes, child support, and student loans are exceptions to this general rule.)

If your debts are mainly of the type that requires a judgment, the next question is whether you have any income or property that your creditors can seize if they go to the trouble of obtaining a judgment. For instance, if all of your income comes from Social Security (which can’t be taken by creditors), and all of your property is exempt, there is nothing your creditors can take from you to satisfy their judgment. That makes you “judgment proof.”

While you may still wish to file for Chapter 7 bankruptcy to get a fresh start, nothing bad will happen to you if you don’t file, no matter how much you owe.

Will Chapter 7 Bankruptcy Discharge Enough of Your Debts?

Certain categories of debts cannot be discharged in Chapter 7 bankruptcy. It doesn’t make much sense to file for Chapter 7 bankruptcy if your primary goal is to eliminate these non-dischargeable debts. The main non-dischargeable debts are:

  • Back child support and alimony obligations
  • Student loans, unless repayment would cause you undue hardship
  • Income taxes less than three years past due
  • Recent debts for luxuries (more than $550 to any one creditor incurred within 90 days before you file for bankruptcy, and cash advances of more than $825 within 70 days before you file), and
  • Court judgments for injuries or death to someone arising from your intoxicated driving.

The bankruptcy judge may rule some types of debts as non-dischargeable if the creditor objects to a discharge in the bankruptcy court. These debts include:

  • Debts incurred on the basis of fraud, such as lying on a credit application or writing a bad check
  • Debts from willful or malicious injury to another or another’s property
  • Debts from larceny (theft), breach of trust, or embezzlement, or
  • Debts arising out of a marital settlement agreement or divorce decree that aren’t otherwise automatically non-dischargeable as support or alimony.

If the bulk of your indebtedness is from debts that creditors may object to being discharged, it may still make sense to file for Chapter 7 bankruptcy and hope your creditors don’t object.

Co-debtors will still be on the hook. If you want to discharge debts for which you have a co-debtor (such as someone who cosigned a loan for you, or a business partner who is equally liable for the debt), bankruptcy won’t wipe out the debt. If the debt is of a type that can be discharged in Chapter 7 bankruptcy, you will no longer be legally responsible for paying it, but your co-debtor will.

How Much Property Will You Have to Give Up?

Whether or not you decide to file for Chapter 7 bankruptcy may depend on what property of yours will be taken to pay your creditors (“nonexempt” property) and what property you get to keep (“exempt” property).

Certain kinds of property are exempt in almost every state, while others are almost never exempt. The following are items you can typically keep (exempt property):

  • Motor vehicles, up to a certain value
  • Reasonably necessary clothing (no mink coats)
  • Reasonably needed household furnishings and goods (the second TV may have to go)
  • Household appliances
  • Jewelry, up to a certain value
  • Personal effects
  • Life insurance (cash or loan value, or the proceeds of life insurance), up to a certain value
  • Pensions
  • Part of the equity in your home
  • Tools of your trade or profession, up to a certain value
  • A portion of unpaid but earned wages, and
  • Public benefits (welfare, Social Security, unemployment compensation) accumulated in a bank account.

Items you must typically give up (nonexempt property) include:

  • Expensive musical instruments (unless you’re a professional musician)
  • Stamp, coin, and other collections
  • Family heirlooms
  • Cash, bank accounts, stocks, bonds, and other investments
  • A second car or truck, and
  • A second or vacation home.

Is Chapter 7 Bankruptcy More Than You Need?

You may be considering bankruptcy just to stop harassment by your creditors. However, in most cases, you can stop creditors from making telephone calls to your home or work by simply telling them to stop. For more information, see What to Do If a Bill Collector Crosses the Line.

Deciding Whether to File Chapter 7 Bankruptcy

If you determine that you are judgment proof, that you’ll be stuck with significant debt following bankruptcy, or that you may have to give up too much property, Chapter 7 bankruptcy may not make sense for you.

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Chapter 13 Bankruptcy Instead of Chapter 7 Bankruptcy

 

For some debtors, Chapter 13 bankruptcy is a better option than Chapter 7 bankruptcy.

For some debtors, Chapter 13 bankruptcy is a better option than Chapter 7 bankruptcy. And sometimes Chapter 13 is the only option because a debtor is not eligible for Chapter 7 bankruptcy.

It’s important to sort out the issues and decide which form of bankruptcy is best for you. Many debtors assume that Chapter 7 is better than Chapter 13 because Chapter 13 requires debtors to repay a portion of debt, whereas Chapter 7 wipes out most debts. But this is not always the case. Here are some good reasons to file for Chapter 13 bankruptcy.

You Are Not Eligible for Chapter 7 Bankruptcy

Some debtors cannot file for Chapter 7 — leaving Chapter 13 as the only option. You cannot file for Chapter 7 if both of the following are true:

  • Your current monthly income over the six months prior to your filing date is more than the median income for a household of your size in your state (go to the website of the United States Trustee, www.usdoj.gov/ust, and click “Means Testing Information” to see the median figures for your state).
  • Your disposable income, after subtracting certain expenses and monthly payments for debts you would have to repay in Chapter 13, exceeds certain limits set by law. These calculations are commonly referred to as the “means test” — if you have the means to repay a certain amount of your debt through a Chapter 13 repayment plan, you flunk the test and are ineligible for Chapter 7 bankruptcy.

The means test can get fairly complex — and, to make matter worse, Congress has its own definitions of “disposable income,” “current monthly income,” “expenses,” and other important terms, which sometimes operate to make your income seem higher than it actually is. You can find step-by-step instructions to determine if you qualify for Chapter 7 with the help of your attorney.

In addition, if you have received a Chapter 7 bankruptcy discharge within the last eight years or a Chapter 13 discharge within the last six years, you may not file for Chapter 7 bankruptcy.

When Chapter 13 Is Better Than Chapter 7

Even if you are eligible for Chapter 7 bankruptcy, there are some situations when filing for Chapter 13 may be more advantageous than filing for Chapter 7.

You are behind on your mortgage or car loan, and want to make up the missed payments over time and reinstate the original agreement. You cannot do this in Chapter 7 bankruptcy. You can make up missed payments only in Chapter 13 bankruptcy.

You have a tax obligation, student loan, or other debt that cannot be discharged in Chapter 7. You can include these debts in your Chapter 13 plan and pay them off over time.

You have a sincere desire to repay your debts, but you need the protection of the bankruptcy court to do so. This might be the case if creditors are coming after you or if you simply require the formal structure and deadlines the Chapter 13 process provides in order to follow through on your good intentions.

You have nonexempt property that you want to keep. When you file for Chapter 7 bankruptcy, you get to keep only exempt property – property that is protected from creditors under state or federal law. You have to give your nonexempt property to the bankruptcy trustee, who can sell it and distribute the proceeds to your creditors. In Chapter 13, you don’t have to give up any property. Instead, you repay your debts out of your income. So, if you have nonexempt property that you can’t bear to part with, Chapter 13 might be the better choice.

You have a co-debtor on a personal debt. If you file for Chapter 7 bankruptcy, your co-debtor will still be on the hook — and your creditor will undoubtedly go after the co-debtor for payment. If you file for Chapter 13 bankruptcy, the creditor will leave your co-debtor alone, as long as you keep up with your bankruptcy plan payments.

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