There are three primary types of bankruptcy available to individuals:
Chapter 7: Involves surrendering some of your property in return for a discharge of many of your debts. The trustee sells any non-exempt property and pays your creditors. Chapter 7 filing fee is $299.
Chapter 13: Involves a payment plan or rehabilitation-style case for individuals with a regular source of income. In Chapter 13, you keep your property, but must commit to a three- to five-year repayment plan. You then obtain a discharge of most of the debts not paid in the plan. The filing fee for Chapter 13 is $274.
Chapter 11: A more complex rehabilitation-style case used primarily by business debtors, but sometimes by individuals with substantial debts and assets. The filing fee for Chapter 11 is $1,039.
In both Chapter 7 and 13 types of bankruptcy, most creditors must stop efforts to collect debts after you file your case.
What are the changes under the 2005 law?
Changes to bankruptcy law may make it harder for some people to file bankruptcy. A few filers with higher incomes are no longer allowed to use Chapter 7 bankruptcy, but instead have to repay at least some of their debt under Chapter 13. All debtors now have to get credit counseling before they can file a bankruptcy case — and additional counseling on budgeting and debt management before their debts can be wiped out.
About the Author
Attorney Adam Peck has been practicing law since 1981. A former successful business owner, Mr. Peck initially focused his legal career on business law. Within the first three years, after some colleagues and friend’s parents endured nursing home neglect and elder abuse, he continued his education to begin practicing elder law and nursing home abuse law.