I recently gave a brief presentation on bankruptcy to the Deacons of a local church. As part of their benevolences they assist parishioners who have financial difficulty. They needed some guidance to identify situations where bankruptcy would be an appropriate solution. The talk also addressed the differences between Chapter 7 and Chapter 13 bankruptcies. What follows is the outline handout for the presentation.
Bankruptcy is a system established by federal law that allows an insolvent honest debtor the opportunity to discharge personal liability of all allowed debts and achieve a financial fresh start.
- Usually 4 month process after the petition is filed
- Usually no payments to the trustee
- Trustee can liquidate non-exempt assets
- 3 to 5 year process after the petition is filed
- Payments for 3 to 5 years pursuant to a plan approved by the judge
- Trustee does not liquidate assets
- Provides discharge of some debts not discharged by Chapter 7
Who can file?
- Chapter 7, if no bankruptcy discharge in past 8 years and meet income “Means Test”
- Chapter 13 if no chapter 7 discharge in past 4 years or chapter 13 discharge in past 2 years; also subject to debt limits
Reasons to not file
- Too many assets
- Too much income
Alternatives to Bankruptcy
- Consumer Credit Counseling
- Debt Settlement
“Capitalism without Bankruptcy is like Catholicism without Hell.”
~ Ziad K. Abdelnour, Economic Warfare: Secrets of Wealth Creation in the Age of Welfare Politics