Chapter 13 & Chapter 7 Bankruptcy: Key Concepts and Procedures

What is a wage earner plan?

A bankruptcy protection scheme that allows income earners to satisfy outstanding debts within a specific time frame.

What is another name for the wage earner plan?

Chapter 13 or regular income plan.

Who is eligible for a Chapter 13 bankruptcy plan?

Individuals with regular incomes who can pay off some or all of their debts.

What is the typical repayment period for a Chapter 13 plan?

Three to five years.

What is an automatic stay in bankruptcy?

A court order that temporarily prevents all creditors from recovering claims arising before the bankruptcy proceeding.

What role does a bankruptcy trustee play in Chapter 13?

They verify the accuracy of the bankruptcy petition and help review and approve the repayment plan.

What happens if the debtor makes all scheduled payments in Chapter 13?

They are discharged of any remaining amounts due that could not be repaid within the repayment period.

What is Chapter 7 bankruptcy also known as?

Straight bankruptcy or immediate liquidation plan.

What occurs in a Chapter 7 bankruptcy?

The debtor's assets are sold, creditors receive payment, and the debtor is freed from most debts.

What is the means test in Chapter 7 bankruptcy?

A test to determine if an individual's Chapter 7 filing can be presumed to be an abuse of bankruptcy laws.

What happens to a debtor's assets in Chapter 7?

Most assets are given to the bankruptcy trustee and sold to pay creditors.

What must a debtor do to reaffirm a debt in Chapter 7?

Sign a written reaffirmation agreement and file it with the court.

What assets can a debtor typically keep during bankruptcy?

A small amount of equity in their homes, an inexpensive vehicle, and limited personal property.

How long does bankruptcy remain on a credit record?

10 years.

What is the waiting period to file Chapter 7 bankruptcy again?

At least six years.

What challenges do individuals face after declaring bankruptcy?

Trouble renting housing, obtaining loans, buying insurance, and finding employment.

Why should bankruptcy be considered a last resort?

It has long-term negative impacts on credit and financial opportunities.

What is the impact of bankruptcy on a debtor's credit score?

It typically results in a lower credit score.

What is a common consequence of filing for bankruptcy?

Creditors may lend to individuals at much higher interest rates.