Are you considering filing for bankruptcy? If so, you likely have many questions. This article is designed to answer some frequently asked bankruptcy questions, but for case specific information be sure to consult with a local bankruptcy attorney.
Q: What types of bankruptcy are available to individuals?
A: Most individuals who file for bankruptcy in the United States file for either Chapter 7 or Chapter 13 bankruptcy. However, there are actually four different types of bankruptcy available for individuals who are not able to keep up with their debts:
- Chapter 7 Bankruptcy: A form of bankruptcy which involves a few-month process during which your eligible property is sold off in order to pay your creditors.
- Chapter 11 Bankruptcy: A type of bankruptcy that is generally used by business debtors, but that can be beneficial to individual debtors who have substantial debts and assets.
- Chapter 12 Bankruptcy: A special type of bankruptcy that is only available to family farmers and fishermen.
- Chapter 13 Bankruptcy: A form of bankruptcy that involves a three to five year process during which the debtor pays off a portion of their debt as dictated by a court-supervised repayment plan.
Q: Can anyone file for bankruptcy?
A: No, not anyone can file for bankruptcy. In order to file for bankruptcy you must meet the eligibility requirements specified in the bankruptcy chapter under which you seek protection. For example, an individual debtor interested in filing for bankruptcy protection under Chapter 7 must be able to show that they cannot afford to repay their creditors. If a court determines, based on a formula known as the “means test”, that the debtor cannot afford to repay their creditors then they are eligible to file for Chapter 7 bankruptcy. However, even if the means test indicates that an individual can afford to repay their creditors, and are therefore not eligible to file under Chapter 7, they may be able to convert their case to a Chapter 13 bankruptcy if they (1) have a regular income, and (2) do not have debts in excess of a certain amount (i.e. $1,081,400 in secured debts and $360,475 in unsecured debts).
Q: What’s the difference between a “secured creditor” and an “unsecured creditor”?
A: A secured creditor is generally a bank or some other type of lender that acquires a lien on an asset of yours in exchange for issuing credit to you. In other words, a secured creditor has an interest in an asset of yours that allows them to have that asset sold in the event that you are unable to repay them. For example, if you take out a mortgage from a bank in order to buy a house, that mortgage is likely secured by the house and the bank likely has the right to foreclose on the house if you are not able to keep up with your mortgage payments. On the other hand, an unsecured creditor does not hold an interest in any of your assets.
Q: Will filing for bankruptcy discharge all of my debts?
A: Unfortunately, no. Generally speaking, non-dischargeable debts include debts incurred for:
- Income and property taxes (except in some circumstances),
- Alimony and child support,
- Fines payable to a city or a state,
- Restitution imposed as part of a criminal sentence, and
- Educational loans.
Additionally, debts not listed on your bankruptcy forms and debts incurred after you file for bankruptcy will also not be discharged.
Do You Need Help Filing for Bankruptcy?
If you are interested in filing for bankruptcy in Iowa, know that the Noyes Law Office P.C. is here to help. Our experienced bankruptcy attorneys would be happy to discuss the pros and cons of filing for bankruptcy with you during a free no obligation consultation. To schedule a meeting with our firm contact us at our Fairfield office today by calling (641) 472-3236.