Congress established uniform federal laws regarding bankruptcies, and the law is federal – administered by US courts. However, bankruptcy is not exactly administered in the same fashion from one state to the next, even though the main framework may be the same. Provisions can vary from state to state and even from district to district.
Customs in Local Courts
Each court may have its own customs that are different from those of other courts. These local customs may include:
The role of the trustee in the process
Specifics for how the laws are interpreted
How US Bankruptcy laws are administered
Also, different forms of Chapter 13 plans are sometimes found in individual districts. Even if the rules become uniform, they can still be interpreted in different ways, depending on the district in which you file, according to the Bankruptcy Law Network.
Hire a Local Bankruptcy Attorney
The most important takeaway from these different interpretations of the law is that you should consult with a local attorney in your own area for your bankruptcy. It is much easier for you to enter a bankruptcy hearing with an attorney who knows and is familiar with the bankruptcy trustee, rather than going into the hearing with someone who has never been there before.
The type of bankruptcy you file depends on your own individual debt situation, and it is a decision best discussed with your local bankruptcy attorney. Chapter 7 and Chapter 13 are very different courses of action. Both will relieve you from some debts, and the creditors will no longer be able to harass you.
That’s where the similarities end. In Chapter 7 bankruptcy, many or most of your debts will be wiped out, and you will never be asked to pay them. In a Chapter 13 bankruptcy, you will be agreeing to repay many debts, over a specified time period.
Chapter 7 is sometimes called “straight bankruptcy.” It is a more commonly used type. To use Chapter 7, you must have few or no assets that can be sold to pay your creditors. The discharge will apply to most of your debts. Discharging debts means dismissing or waiving them, says Bankruptcy.Lawers.com.
Some key points about Chapter 7 include:
Qualification is based on income and on a means test that is established in bankruptcy law. If you have the ability to repay some of your debts, you may have to file Chapter 13.
You may keep exempt property, and it will be protected from the reach of your creditors.
Other available assets that are nonexempt may be sold to pay your creditors by your bankruptcy trustee.
A Chapter 7 discharge will apply to most of the more common types of debt, like medical bills and credit cards.
The majority of Chapter 7 cases are called “no asset” cases. This means there will be nothing left to pay your creditors after you account for property exemptions. Federal or state laws control the exemptions, and this is one reason why bankruptcies are not the same in every state.
Chapter 13 will reorganize your debts, and you will make payments, based on a specific plan. Any remaining debts may be discharged at the completion of your plan. If you have a fair amount of disposable income available after you pay for your basic needs, you may only be allowed to file a Chapter 13, and not a Chapter 7.
If this all sounds confusing, that’s because it is. Hiring a local bankruptcy attorney will allow you to choose the best option, and to retain the most assets through your bankruptcy.
Tyler, Bartl & Ramsdell, P.L.C. can help you map out the best way forward for yourself, your family, and your business. Don’t put it off any longer. Schedule a free consultation today, (703) 549-5000.