This is a short guide to the different types of bankruptcies.
Chapter 7: Liquidation, Businesses or Individuals
The filing fee for a chapter 7 bankruptcy is $335 and the average cost to hire an attorney is $2,500. Under this chapter, the Bankruptcy court appoints a trustee to evaluate your assets and determine whether selling your assets will result in a meaningful recovery for the benefit of your unsecured creditors. In order to take advantage of this chapter, your household income must be less than the state median income, or if your household income exceeds the state median income and your debts are primarily consumer debts, your disposable monthly income must be less than a specified amount. If you don't pass this "means test" then you cannot file for Chapter 7, you will have to file either a Chapter 11 or Chapter 13.
Chapter 11: Reorganization, liquidation or involuntary, Businesses or Individuals
The filing fee for a chapter 7 bankruptcy is $1,717 and the average cost to hire an attorney is $20,000. A Chapter 11 is a reorganization of business or individual debts. The provisions are very complicated, and you should consult with an attorney before filing a petition.
Chapter 12: Reorganization, Family Farmers or Fishermen
The filing fee for a Chapter 12 bankruptcy is $275 and the average cost to hire an attorney is $3,500. This bankruptcy is only available to family farmers and fisherman, but a farmer may not have more than $3,792,650 in debts and a fisherman no more than $1,757,457 in debt in order to use this type of bankruptcy.
Chapter 13: Repayment of All of Part of the Debts by Individuals with Regular Income
The filing fee for a chapter 13 bankruptcy is $310 and the average cost to hire an attorney is $3,500. Under ?109(3), in order to qualify for a Chapter 13, your must have a regular source of income, and have liquidated non-contingent secured debts less than $1,184,200, and liquidated non-contingent unsecured debts less than $394,725. If your debt exceeds these limits, and you do not qualify for a Chapter 7, the only other option is to file a Chapter 11.
In a Chapter 13, the debtor calculates his/her disposable monthly income, and then applies that amount towards his/her debts every month for a period of three to five years. The plan setting forth the repayment terms must be approved by the Bankruptcy Court, and you do not obtain a discharge until all of the payments have been completed.
Additional resources provided by the author
Detailed bankruptcy information can be found on the Western Washington Bankruptcy Court website.
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