There are six types of bankruptcy, chapter 7, chapter 9, chapter 11, chapter 12, chapter 13, and chapter 15. Chapter 9 is for cities; chapter 11 is a business reorganization; chapter 12 is for farmers, and chapter 15 is for foreign businesses. So, for most people, the choice is between chapter 7 and chapter 13.
A chapter 7 case allows an individual to wipe out most ordinary debts while keeping "exempt" assets. There are two sets of exemption laws, which are the state exemptions and the federal exemptions. Minnesota atate exemptions allow you to keep $330,000 of equity in your home, $4,400 of equity in your car, and about $9,000 worth of household goods. Federal exemptions let you keep $10,100 of equity in your home, $3,450.00 of equity in your car, about $9,000 of equity in household goods, and provide a wild card exemption of $11,875.00. In 2005 Congress enacted a "means test", which was intended to force more people into chapter 13 bankruptcies.
Generally speaking, in a chapter 7 you are "in and out" in about 90 days from the day we file the case with the trustee.
If you are behind on your house or car payments, although chapter 7 will temporarily stop a foreclosure or repossession, you will have to catch up on your house payments or car payments on your own.
A chapter 13 is put together much like a chapter 7, but instead of being "in and out" in 90 days, you make payments to a trustee for a period of three to five years.
A chapter 13 can be used to catch up on a home mortgage. Typically you have to pay those payments that come due after the case is filed with the court, but the payments which were behind when you filed can be stretched out over a three to five year period. For example, if your house payments are $1,000 a month and you are behind $9,000.00 when the case is filed on February 10th, you would pay the $1,000 regular payment directly to the mortgage company starting March 1st, and you would pay the chapter 13 trustee $200 a month starting March 15th. The trustee would take the $200.00 and deduct a commission and send it to the mortgage company to apply to the missed payments.
(The above is a very simplified version, by the way!).
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