Relatively new legislation has framed bankruptcy to limit the amount of Chapter 7 bankruptcy filings. This is controlled by restricting Chapter 7 bankruptcy to only people that fall under the median state income, when adjusted for inflation and family size. Individuals above the median household income can only file for Chapter 13 bankruptcy. The new laws further changed Chapter 13’s duration to a compulsory 3-5 year period.
Chapter 13 also has some advantages over Chapter 7. For example, most assets will not be liquidated in a Chapter 13, which is often a concern for those that are self-employed or running an unincorporated business. Chapter 13 debts must have unsecured debt that amounts to less than $336,900, and with secured debt that is up to a maximum of $1,010,650.
Unlike a Chapter 7, a Chapter 13 bankruptcy requires the debtor to pay back a portion of their debts over a 3 to 5 year period. The amount of debt that needs to be paid back is often drastically reduced, often to just pennies on the dollar. The amount of payback is based on a number of factors, such as income, living expenses, protected assets, types and total amount of debt.
If you’re struggling to pay down debts, you may want to consult with a bankruptcy attorney. Most consultations are completely free and require no obligation. Although the process seems complicated, a bankruptcy lawyer can help you to understand how bankruptcy really works, and also explain the pros and cons of your alternatives.
Lincoln Law has focused on bankruptcy for over a decade. Every day, we aid people in writing off debts ranging from $5,000 to $1,000,000. If you’d like to explore your options and learn more about Chapter 7 and 13, contact the bankruptcy team at Lincoln Law at 800-404-0018 for a free consultation.