Bankruptcy FAQ

Legal Counsel from a Chico Bankruptcy Lawyer

Will bankruptcy wipe out all my debts?

Certain debts cannot be discharged in bankruptcy, and it is important to be fully informed before you choose to file for bankruptcy. Most bankruptcy cases involve Chapter 7 (liquidation) or Chapter 13 (reorganization) filings, and these two types of bankruptcy differ greatly in the types of debt that can be eliminated. Under a Chapter 13 bankruptcy, you must file a repayment plan with the bankruptcy court that outlines in detail the way that you will repay your creditors. Some debts must be repaid in full, and others may be completely discharged.

Debts from back child support, alimony, and tax debts cannot be discharged through bankruptcy. Student loans are also not typically forgiving through bankruptcy unless you can prove that repaying those debts would be an undue burden.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 bankruptcy is the most common type of bankruptcy in America because it allows debtors to discharge most of their debts. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection and sell it to pay off your creditors. Chapter 13 bankruptcy does not discharge debt, but rather allows you to consolidate all of your debt into a repayment plan that you must pay over time. The amount that you will have to pay differs based upon how much you owe, your income, your property, and the types of debt that you owe.

Chapter 13 bankruptcy allows you to keep all of your property, whereas in Chapter 7 you select the property that you are eligible to keep from a list of state exemptions. For more information, call the team at Baker & Farris, Attorneys at Law.

Am I free to choose between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

Individuals who meet the legal requirements for both types of bankruptcy have the right to choose, but this is not the case for most individuals. According to a new bankruptcy law, if you do not pass the means test you will only be eligible for a Chapter 13 claim. The means test rules out individuals who have an income higher than the median income for a family of their size in the state of California if their disposable income (after certain allowed expenses and required debt payments) would allow them to pay back their debt through a Chapter 13 claim.

Most people choose to file for Chapter 7 if they are able to qualify because this type of bankruptcy does not require individuals to pay off their unsecured debt. One of the main reasons that an individual would choose Chapter 13 instead is if they are behind on their mortgage and want to keep their house.

Contact a Chico bankruptcy lawyer at our firm today to learn more about your rights and other debt relief options!