In both bankruptcy types, the debtor files a bankruptcy Petition with the Federal Bankruptcy Court located in the district where the debtor has lived for at least six months or where a significant amount of his or her assets is located. The Petition sets forth all of the debtor's assets (both real property and personal property and it?s value), a list of all creditors and the amounts owed indicating whether that creditor is secured (like a mortgage company or a bank that financed your car purchase), unsecured or has some priority status (e.g. taxes owed to governmental agencies, claims by spouses in divorce actions or claims by employees for wages, commissions, or benefits), a complete statement of your income (along with total gross income for the previous two years) and a statement of itemized regular monthly living expenses.

About 30 to 45 days after the Petition is filed in bankruptcy court, the debtor meets with a trustee, who is an individual appointed by the federal government to oversee the debtor's bankruptcy on behalf of the creditors. He or she will review your Petition with you and verify that all of the information contained in the Petition is accurate. What happens beyond that point depends upon whether a Chapter 7 or a Chapter 13 has been filed.

In a Chapter 7, the debtor demonstrates to the trustee that he or she does not have any disposable income to pay debts or possesses assets of a significant value that could be sold to raise money to pay debts. In this case, the debtor proves that he or she should be legally relieved of the obligation to pay those debts by having the debt "discharged" in Bankruptcy Court. If the trustee agrees with this position, the matter is marked as a "no asset" bankruptcy and, barring any objections to discharge of debt by a creditor, an order for discharge is issued.

The other type of bankruptcy available to individuals, Chapter 13, is usually filed for one of the following four reasons:

In a Chapter 13 bankruptcy, in addition to filing a Petition, the debtor files a plan and summary of plan. These are documents that set forth the debtor's strategy for payment to creditors. A plan can be as long as 36 months (3 years) at the debtor's discretion, and up to 60 months (5 years) with court approval. The debtor's goal when meeting with the trustee in a Chapter 13 situation is to prove that the plan is feasible (i.e. there is enough regular income available to the debtor over and above regular monthly expenses to cover the payments proposed) and is proposed in good faith. In other words, a debtor cannot propose to pay $200.00 of his or her $1,000.00 disposable monthly income, over 36 months. Both the trustee and the creditors would demand the contribution of much more disposable income and, if necessary, over a longer period of time, to pay back debt. The positive side of this type of bankruptcy filing is that if the plan, as proposed, is feasible and made in good faith, the creditors have no choice but to accept it.

Finally, to qualify for a Chapter 13, the debtor must meet the following criteria:

Most people that go into a Chapter 7 bankruptcy are concerned with whether or not they will lose their home as a result.

The short answer is that it depends on the amount of equity one has in his or her house and the type of bankruptcy filed.

As of October 17, 2005, the bankruptcy laws changed. The new law has given both debtors and attorneys more responsibilities and tasks to complete in relation to the filing of a bankruptcy. Now a debtor is required to complete a credit counseling course prior to filing his or her bankruptcy petition. Also, a debt management course must be completed by the debtor prior to discharge being granted. Additionally, the new law requires the attorney to perform a "means test" to determine which Chapter a debtor is qualified to file. For instance, if the debtor falls above the state median (as determined by the State), he or she may be forced to file a Chapter 13 rather than a Chapter 7. Please remember, each situation is unique. Please contact our offices to discuss how changes in the law may affect your situation.

Please remember that bankruptcy cases differ from each other. For answers to your specific questions, please contact our office.