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Circumstances drive choice between bankruptcy chapters

In general, there are two options open to individuals filing bankruptcy in New Hampshire. Chapter 7 is also known as straight liquidation bankruptcy because the debtor's nonexempt assets are liquidated, and the proceeds are used to pay off debts. Chapter 13 bankruptcy involves the establishment of a payment plan and is open to debtors who have regular income.

In order to file under Chapter 7, debtors must first pass the means test; those who earn more than the median income in New Hampshire may have difficulty passing the means test. With exceptions for student, tax, child support and other special debts, most debts will be discharged at the conclusion of the process. However, the action may only be filed once every eight years.

In a Chapter 13 bankruptcy, the debtor enters into a payment plan for a term of between three and five years. Payment amounts are based on the debtor's income after allowance is made for things like food, shelter and other necessities. In order to qualify for Chapter 13, the debtor must have unsecured debt and secured debt totaling less than the amounts described by the bankruptcy codes. Once the debtor completes the payment plan, the remaining debts may be discharged

Under either chapter, the debtor must complete pre-bankruptcy credit counseling from an approved agency within 180 days prior to filing. It may be possible to preserve a vehicle or the home in Chapter 7 or Chapter 13, depending on the circumstances of the case.

Those who have questions about the differences between the Chapter 7 and Chapter 13 bankruptcy may want to consult an attorney. An attorney may be able to assist in organization and preparation for bankruptcy or may be able to suggest alternative means of dealing with debt.

Source: American Bar Association , "General Comparison of Chapter 7 and Chapter 13 Bankruptcy", October 01, 2014

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