BANKRUPTCY FAQ (Chapters 7 and 13)
What exactly is bankruptcy?
Bankruptcy is a process in federal court federal court designed to help debtors eliminate or restructure their debts. Bankruptcies generally fall into two categories: Chapter 7 liquidation bankruptcies and Chapter 13 reorganization bankruptcies.
For more information about the bankruptcy process, see our Chapter 7 and Chapter 13 pages. For more about the specific terms in this FAQ, see our bankruptcy glossary.
What is the difference between Chapter 7 and Chapter 13 bankruptcy?
In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take certain nonexempt property and sell it. The proceeds will then be distributed to your creditors.
In Chapter 13 bankruptcy, your debts are not discharged. Instead, you file a repayment plan specifying how you will pay back all or a portion of your debts over time. The amount you’ll have to repay depends on how much you earn, the amount and types of debt you owe, and how much property you own.
In either type of bankruptcy, the bankruptcy court orders an “automatic stay.” The automatic stay prohibits most creditors from taking any action to collect the debts you owe them, including collections lawsuits and harassing phone calls.
You lose no property in Chapter 13 bankruptcy, because you fund your repayment plan through your income. In Chapter 7 bankruptcy, you select property you are eligible to keep from a list of state exemptions. To learn more about assets in chapter 7 bankruptcy see My Assets in Chapter 7 Bankruptcy.
How do I choose between Chapter 7 and Chapter 13 Bankruptcy?
The majority of filings are under Chapter 7. If you meet the eligibility requirements for both types of bankruptcy, then you can choose the type of bankruptcy that makes the most sense for your situation. However, you may not be eligible for both types.
Under the current bankruptcy laws, debtors whose incomes exceed the median income for a family of their size in their state may not be allowed to file for Chapter 7 bankruptcy. Generally, if the debtor’s disposable income would allow them to pay back some portion of their debt over a five-year period they will not be eligible for Chapter 7 relief.
Also, if your secured debts total more than $1,010,650 and your unsecured debts are more than $336,900, you cannot file a Chapter 13 bankruptcy.
Can I file if I’m being sued?
Yes. It’s almost never too late to file bankruptcy. As long as the debt is dischargeable, you can still discharge the debt even if a creditor has filed a lawsuit against you and received a judgment.
Where does my case get filed?
Your case is filed in Federal Court in the District where you reside (or for a business, its principal place of business) for the 180 days prior to the date your case is filed.
Do I get to choose which debts to list in my Bankruptcy?
No. You must list all your assets and all your debts, no matter which type of bankruptcy you file. If you wish for certain debts to be excluded from discharge, you may voluntarily reaffirm any debt. However, you are still required to list the debt in your filing.
Louisville Bankruptcy Attorneys
If you are interested in finding out if chapter 7 bankruptcy relief is right for you, please call (502) 413-2996 or contact us online to learn about how we can help you. Our bankruptcy and debt relief lawyers proudly represent clients throughout Jefferson and surrounding counties. We are dedicated to providing cost-effective results for our clients. Your initial consultation is FREE.