Qualifying for a
Chapter 7 or 13 Bankruptcy
You qualify for filing a Chapter 7 bankruptcy
if your necessary and secured monthly expenses equals or exceeds your income with nothing left to
repay creditors in a Chapter 13 bankruptcy. Our Louisville
Kentucky Bankruptcy Court, often approves Chapter 13 bankruptcy plans that repay 10%,
or less, of what you owe.
There may be several reasons for filing a
Chapter 13 bankruptcy instead of a Chapter 7. First a Chapter 13 will allow you
to cure
the arrearage on your home and stop a foreclosure. Filing a Chapter
7 or answering a foreclosure complaint will only temporarily delay a foreclosure. Together answering a foreclosure and filing a Chapter 7
will normally delay the process for
at least a year.
Under the means test the US Trustee may
challenge your Chapter 7 if he can show that you have sufficient disposable
income to afford a payment for a Chapter 13. The US Trustee
generally cannot challenge a case which is filed as a Chapter 13 and
converted to a Chapter 7 later after the debtor has made efforts to make it work
and cant afford the Chapter 13.
You can repay alimony, taxes, student loans and child support at the expense
of unsecured creditors in a Chapter 13. You can strip away a second mortgage in a Chapter 13
if there is no equity for the second mortgage. A Chapter 13 will
discharge more types of debts than a Chapter 7. You can stretch out car or home mortgage
payments and often strip away a second mortgage. Most importantly the US Trustee
tends to not challenge marginal cases which
are
filed as a Chapter 13 and converted to a Chapter 7 later unless it is obvious
the Debtor can repay and is not giving any effort to repay.
Click on this link to download an excel spread sheet to
prepare your
Chapter 13 or
Chapter 7
budget. Remember that you
are allowed 401k contributions, charitable expenses, and private school expenses
if you have a history of these past expenses. We have a list of
often overlooked expenses. You may have to document
large medical or other expenses that are unusually high but you may take them.
School lunches
vacations,
kids school activities, repair and replacement of household goods, pet care,
grooming, and yard care are necessary expenses that are often overlooked.
If
a debtor files a Chapter
13 bankruptcy that repays 70%, the debtor gets the presumption of good-faith.
Chapter 13's are often more affordable have greater
benefits, and cost less than debt counseling,
but require you to pay whatever disposable income you have into the plan.
If you cannot afford partial repayment, all of your property is exempt,
and have largely unsecured debts filing a Chapter 7
bankruptcy may be a better option than filing a Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, you normally repay nothing and
often have nothing to lose.
Listing your Expenses on this form should help
you to decide if a Chapter 7
bankruptcy filing is right for you. To save time, prepare your bankruptcy online.
The Bankruptcy Manual fully discusses how to qualify for a Chapter 7 or 13. Download your free copy.
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