Chapter 7 Bankruptcy allows you to discharge the majority of your unsecured debts such as credit card debt, payday loans, unsecured personal loans and some judgments and taxes. In Chapter 7 Bankruptcy non-exempt assets are sold, the proceeds are divided among creditors, and the balance of the debt is discharged. By discharging these debts it puts you in a position to be better able to meet your secured debt payments (mortgage, car loan.)
Eligibility for Chapter 7 is determined by an income/expense determination compared to regional medians. Generally, tax debt, domestic support obligations including child support or alimony, and student loans cannot be discharged. It is possible, depending upon a showing of extreme hardship, that your student loans may be discharged.
Chapter 13 Bankruptcy will not discharge debts but will allow for a structured repayment plan, usually over a three to five year period. Chapter 13 is most commonly used on secured debt, such as mortgages, car loans, student loan debt and tax debt. Specific debt levels and requirements apply to Chapter 13.
The Means Test is used to determine whether or not you can file for Chapter 7 bankruptcy. This test looks at your income and liabilities and compares them to those of people in your area, based on IRS figures. The test is basically trying to see if you are living above your means. People who fail this test can look at filing Chapter 13 bankruptcy.
The Automatic Stay is an order issued on the day of your bankruptcy filing forbidding creditors from pursuing collection actions against you.
Student loans, some tax debts, personal judgments, alimony and child support are not dischargeable. DannLaw can review your debts and determine which ones are dischargeable.
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