Do It Yourself (DIY) Bankruptcy (2024)

FAQs

Is it cheaper to file Chapter 7 or 13? ›

What Is the Cheapest Type of Bankruptcy? Not only are the fees of Chapter 7 bankruptcy lower, but you also end up paying less to your creditors. While Chapter 7 only requires that you pay the value of your liquidated assets, a Chapter 13 bankruptcy could result in you paying far more over three to five years.

No one loses all of their property when filing for bankruptcy. Find out if you can keep your house, car, and other assets in bankruptcy. Don't worry—you won't lose everything in bankruptcy. Most people can keep household furnishings, a retirement account, and some equity in a house and car in bankruptcy.

Chapter 7 bankruptcy is a type of bankruptcy filing commonly referred to as liquidation because it involves selling the debtor's assets in bankruptcy. Assets, like real estate, vehicles, and business-related property, are included in a Chapter 7 filing.

For example, you can't discharge debts related to recent taxes, alimony, child support, and court orders. You may also not be allowed to keep certain assets, credit cards, or bank accounts, nor can you borrow money without court approval.

If you declare bankruptcy, will you lose literally every dollar that you have in your savings? The answer is no: some cash can be exempted in a Chapter 7 case. For example, typically under Federal exemptions, you can have approximately $20,000.00 cash on hand or in the bank on the day you file bankruptcy.

There are no debt limits for Chapter 7 cases, and this form of bankruptcy may allow all unsecured debts to be completely eliminated. However, a debtor will likely need to turn over certain non-exempt assets to the bankruptcy trustee, who will liquidate these assets and make payments to creditors.

Before you stop paying bills, you should be sure that you are going to file for bankruptcy and have a plan for the timing. It's hard to catch up once you fall behind, and late payments, penalty fees, and interest can add up quickly, not to mention that waiting may give your creditors time to file a lawsuit.

Under Chapter 13, you also have the $550 cash exemption along with a wildcard exemption up to $1,475, allowing you to keep $2,025 in cash under Chapter 13. However, when filing for Chapter 13 bankruptcy, you can claim and exempt 75 percent of the wages you earned in the preceding 30 days.

If you file for personal bankruptcy, you generally have two options: Chapter 7 or Chapter 13. A Chapter 7 bankruptcy will sell off many of your assets to pay your creditors. In a Chapter 13 bankruptcy, you keep the assets but must repay your debts over a specified period.

Another common question: “Can we take a vacation after we file bankruptcy – or is this and other lifestyle expenses now off-limits?” My answer about taking a vacation is similar to my answer about dining out. Yes, you and your family can take a vacation.

Do Chapter 7 bankruptcies get denied? ›

The court may deny a chapter 7 discharge for any of the reasons described in section 727(a) of the Bankruptcy Code, including failure to provide requested tax documents; failure to complete a course on personal financial management; transfer or concealment of property with intent to hinder, delay, or defraud creditors; ...

Not All Debts Are Discharged

For some, there's just no escaping all of it. Certain debts will remain on your account when you file for Chapter 7 bankruptcy. You will still be responsible for alimony and child support.

What does life after bankruptcy look like? You'll have to endure hardships — from cash flow management to establishing good credit and rebuilding your credit profile — but it's possible to financially recover from bankruptcy and give yourself a fresh start.

Many banks will freeze the money in your checking and savings accounts when they learn about bankruptcy. They do this to protect creditors' assets. You or your attorney can ask the Chapter 7 trustee assigned to your case to contact the bank and release the freeze.

It's a Long Term Commitment – Filing Chapter 13 bankruptcy requires you to make a long-term commitment to the process. Tough To Get Credit or a Mortgage for 7 Years – Other impacts include the inability to get credit cards at a good rate, and filing Chapter 13 makes it tough to get a mortgage.

If you have a solid job or way to make money, but simply can't afford to fully pay what you owe, Chapter 13 may be a good option. It lets you maintain more control over your finances and assets than you would with a Chapter 7 bankruptcy, which forces you to sell most of your assets.

Chapter 7 and Chapter 13 bankruptcy both affect your credit scores the same. Having a Chapter 13 bankruptcy on your credit reports isn't any better for your score than a Chapter 7. However, the individual reviewing your credit might look at more than just your credit score.