Types of Bankruptcies

Chapter 7, often called "Liquidation" or "straight bankruptcy," is the most common form of bankruptcy. In a Chapter 7 bankruptcy, your debts are completely erased immediately when the judge closes your case. In exchange, you must surrender any non-exempt property you own to the trustee appointed by the bankruptcy court, who will sell it to raise money for your creditors. The laws determining which property is exempt and which property is not are highly complex, however, there is good news: Most people who are considering filing bankruptcy do not own anything at all that is not exempt. That’s right, most people can file Chapter 7 bankruptcy without losing any property at all! That is why Chapter 7 is the overwhelmingly most popular type of bankruptcy. The attorneys at Gehi & Associates are knowledgeable about the exemption laws and can help you know which, if any, of your assets are not exempt before you decide to file bankruptcy.

Eligibility for Chapter 7 Bankruptcy is determined by the “Means Test,” a sort of mathematical snapshot of your financial situation. The Means Test is complicated, and the consequences of accidentally filing a Chapter 7 case when you do not qualify can be unpleasant. At Gehi & Associates we make sure your Means Test is computed properly so that there are no unpleasant surprises on your day in court.

Chapter 13, often called "wage-earner’s bankruptcy," is the other form of bankruptcy commonly available to ordinary people. It is available to people with enough regular income to fund a thee-year or five-year repayment plan. In a Chapter 13 case, the debtor proposes a payment plan according to the rules in the bankruptcy laws. Arrangements can be made to have these payments made automatically through payroll deductions. In many cases, the plan does not need to pay 100% of all of the debts, or even come close; most of the debts that remain once the plan is completed are simply erased.

In addition to being the only bankruptcy option for people who fail Chapter 7’s Means Test, there are a few reasons to consider filing a Chapter 13 bankruptcy even when you could file a Chapter 7 bankruptcy. Because you do not have to give up any property in a Chapter 13 bankruptcy, it can be the better choice if you own non-exempt property that you do not wish to part with. Chapter 13 also offers more ways to help with secured debts, such as mortgages and auto loans, than Chapter 7 does. A Chapter 13 case may be advantageous if you need to get caught up on mortgages or car loans without the threat of foreclosure or repossession. One benefit offered exclusively by Chapter 13 that has become very popular since the beginning of the current "Great Recession" is "second mortgage stripping." If you have a second (or third, or fourth....) mortgage, and the amount you owe on the first mortgage is more than your house is worth, then Chapter 13 bankruptcy can completely eliminate your second (or third, or fourth....) mortgage!

In both Chapter 7 and Chapter 13 cases, in addition to your attorney’s fees, there is a filing fee that must be paid to the Bankruptcy Court. There are also additional fees for mandatory “Debtor Education” and “Financial Management” courses that you can take over the telephone or the internet. In a Chapter 7 case, you must pay the entire fee before your case is filed. Gehi & Associates offers convenient payment plans to make this easier for you. In a Chapter 13 case. Part of the fee is paid before your case is filed, while most of it is paid through the Chapter 13 payment plan itself.

"We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code."