An individual has an option to file a Chapter 7 or Chapter 13 personal bankruptcy.
In Chapter 13, an individual can repay creditors using one's earnings or salary for up to five years before being discharged from one's debt, either fully or most of them.
On the other hand, the non-exempted assets of an individual will be liquidated to pay off debts in Chapter 7.
An individual who has filed for Chapter but cannot complete the payment plan may be allowed to convert to Chapter 7.
Chapter 13 payment plan In Chapter 13, an individual who earns below the state's median income will spend three years of one's disposable income to repay the creditors, while it is five years for those who earn above the median.
According to the U.
S.
Courts website, disposable income is defined as the remaining amount after taking out non-dis chargeable debts under Chapter 13 such as mortgage payments and child support, basic living expenses, and charitable donations.
Whatever is left will be used to pay off unsecured debts, such as medical bills, personal loans, and credit card debt.
Bankruptcy conversion If an individual's income has changed, for instance, one does not have work, a request to the court to convert Chapter 13 to Chapter 7 can be made.
The Bankruptcy Code says that an individual can convert anytime as long as one is qualified for Chapter 7.
The requirement is an average income of six months that is lower than the state median or an individual passes a means test that adjusts one's earnings for the expenses.
There are legal websites in the Internet that provides an online calculator for means test.
Chapter 13 hardship discharge Chapter 13 hardship discharge is only limited to requests which involve circumstances that are beyond an individual's control.
An unemployed individual can file a hardship discharge in Chapter 13.
This way, the payment plan would end right away and all remaining unsecured debts will be discharged if the amount that has been repaid to the creditors is equivalent to the amount that they would receive in Chapter 7.
Applying for hardship discharge involves providing proof that the individual's unemployment is not his or her fault and that one is not capable of earning enough to complete even a payment plan that is small.
An individual is likely to get approval if one is disabled by illness or the only employer in the area has closed down.
Bankruptcy dismissal An individual who is not qualified for Chapter 7 can be completely dismissed by the bankruptcy court.
A bankruptcy dismissal can also be issued if an individual does not keep up with the Chapter 13 payment plan without legitimate reason.
In this case, an individual will have to wait another six months for a chance to file for bankruptcy again, and during that time, creditors or lenders are going to be free to file lawsuits to collect their the money owed.
In Chapter 13, an individual can repay creditors using one's earnings or salary for up to five years before being discharged from one's debt, either fully or most of them.
On the other hand, the non-exempted assets of an individual will be liquidated to pay off debts in Chapter 7.
An individual who has filed for Chapter but cannot complete the payment plan may be allowed to convert to Chapter 7.
Chapter 13 payment plan In Chapter 13, an individual who earns below the state's median income will spend three years of one's disposable income to repay the creditors, while it is five years for those who earn above the median.
According to the U.
S.
Courts website, disposable income is defined as the remaining amount after taking out non-dis chargeable debts under Chapter 13 such as mortgage payments and child support, basic living expenses, and charitable donations.
Whatever is left will be used to pay off unsecured debts, such as medical bills, personal loans, and credit card debt.
Bankruptcy conversion If an individual's income has changed, for instance, one does not have work, a request to the court to convert Chapter 13 to Chapter 7 can be made.
The Bankruptcy Code says that an individual can convert anytime as long as one is qualified for Chapter 7.
The requirement is an average income of six months that is lower than the state median or an individual passes a means test that adjusts one's earnings for the expenses.
There are legal websites in the Internet that provides an online calculator for means test.
Chapter 13 hardship discharge Chapter 13 hardship discharge is only limited to requests which involve circumstances that are beyond an individual's control.
An unemployed individual can file a hardship discharge in Chapter 13.
This way, the payment plan would end right away and all remaining unsecured debts will be discharged if the amount that has been repaid to the creditors is equivalent to the amount that they would receive in Chapter 7.
Applying for hardship discharge involves providing proof that the individual's unemployment is not his or her fault and that one is not capable of earning enough to complete even a payment plan that is small.
An individual is likely to get approval if one is disabled by illness or the only employer in the area has closed down.
Bankruptcy dismissal An individual who is not qualified for Chapter 7 can be completely dismissed by the bankruptcy court.
A bankruptcy dismissal can also be issued if an individual does not keep up with the Chapter 13 payment plan without legitimate reason.
In this case, an individual will have to wait another six months for a chance to file for bankruptcy again, and during that time, creditors or lenders are going to be free to file lawsuits to collect their the money owed.