The main goal of any bankruptcy case is getting a discharge of a large amount of debt. Getting a debt discharged means that the debtor is no longer obligated to repay the debt. Credit card debt and medical debt are generally dischargeable through bankruptcy. Taxes, alimony, child support, and student loan debts are typically not discharged through bankruptcy. Car and home loans will be addressed in part II of this series.

The two main types of consumer bankruptcies are chapter 7 and 13. A chapter 7 is often referred to as a liquidation bankruptcy because in these cases, the rules call for selling off any assets over the exemption amounts to pay creditors. Exemptions are rules that allow people filing bankruptcy to keep their home, a vehicle, household goods, and retirement accounts up to the legal limits permitted. You should review your assets with an attorney to determine if your assets are all protected by exemptions. If all of your assets are covered by an exemption, then you’ll get to keep your assets even after filing a chapter 7 bankruptcy petition. In a chapter 7 case, debtors get a discharge of all dischargeable debt about four months after filing their petition with the bankruptcy court.

A chapter 13 bankruptcy is often called a restructuring. In a chapter 13 case, the debtor has a repayment plan that requires monthly payments which go to creditors. A chapter 13 bankruptcy takes all debt and consolidates it into one low interest payment. After completing all of the required monthly payments, the debtor will get a discharge of dischargeable debts that were not repaid through the plan. One final difference between these types of bankruptcies is the cost associated with filing. The attorney’s fees for filing a chapter 13 case are roughly three times the cost to file a chapter 7 case.

Similarities:

  • Every person filing a petition with the bankruptcy court must take a credit counseling course from an approved provider before filing.
  • Every person filing must go to a meeting with the trustee and present their photo ID and social security card.
  • Every person filing must complete a course on financial management after filing their petition.

Trev Peterson and Carly Bahramzad represent debtors filing for bankruptcy. You can reach them by phone at 402-475-7011.

Congress requires that I disclose that our firm is a “debt relief agency” under the Bankruptcy Code. We help people file for bankruptcy relief under the Bankruptcy Code. As with all articles on this website, the contents of this article are not intended as legal advice for any specific legal problem. Nothing in this article is intended to create an attorney-client relationship between the author and the reader. The author is licensed to practice law in Nebraska only, if you are involved with a bankruptcy in a state other than Nebraska you are encouraged to consult with an attorney licensed in the state in which the bankruptcy case is pending.

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