Chapter 7 & Chapter 13 Bankruptcy

Chapter 7 is the simplest and most common form of bankruptcy available: the debtor exchanges their non-exempt assets, if any, for the release of their dischargeable debts.  In nearly all consumer cases, however, the debtor’s property is exempt and is excluded from the bankruptcy estate.

Protection from Creditors: The commencement of the case triggers an injunction (called a “stay”), which prohibits all creditors from beginning or continuing any effort to collect from you including garnishment of wages or bank accounts, repossession of vehicles, and foreclosures of property.  Any action taken by a creditor after the stay comes into effect is legally void and may subject the creditor to monetary sanctions in your favor.

Discharge: a discharge is the legal forgiveness of a debt.  It eliminates your personal liability for a debt.  A bankruptcy discharge, however, does not eliminate liens that are attached to assets before a bankruptcy case is filed. There is an exception, however, if the court grants a motion avoiding a lien.  There are certain debts that are not dischargeable in Chapter 7.  These nondischargeable debts include recent or unfiled taxes; debts incurred by various forms of dishonesty; student loans, restitution awards; debts arising in a divorce; and legal penalties.
If you do not qualify for Chapter 7, you may still qualify for Chapter 13 bankruptcy. This is also known as Wage Earner Bankruptcy because you are still earning an income and meet other requirements.  Under Chapter 13 you establish a plan to repay your debt over a period of three to five years, and you get to keep more of the possessions you worked so hard to acquire.

Every day you work through your plan moves you closer to the fresh start you need for a secure life. When you file for Chapter 13, you establish a repayment plan to make payments over a three- to five-year period. You are able to keep more of your property and assets under a Chapter 13 bankruptcy, as compared to a Chapter 7 bankruptcy.  We have the experience needed to analyze your financial situation and build a viable repayment plan. Under chapter 13, you must qualify and have a solid repayment plan. Some of the Chapter 13 requirements include:
  • Specific limitations govern the amount of secured and unsecured debt that you can have to qualify for a personal bankruptcy under Chapter 13.
  • If your monthly income is greater than Oregon’s median income, your repayment plan must be for five years.  You are not permitted to have a repayment plan that exceeds the five-year period.
  • Under a Chapter 13 bankruptcy, certain priority claims must be paid off first through your repayment plan.  For example, past-due child support or tax bills must be paid off in full through your repayment plan.

Chapter 13 is a good option for you if:
  • You do not want your car repossessed
  • You have significant equity in your home or other property that you want to keep
  • You have regular income for your monthly expenses, but you are unable to keep up with your scheduled payments
  • You are looking to protect co-signers
  • You have a moral desire to pay off your debts