What Happens to Debts I owe to Family or Friends During Bankruptcy?

These sorts of debts are considered to be owed to favored or preferred creditors. You can include additional creditors into this category, like certain credit card companies if you want to keep the card you’ve been using with them. The best way to resolve these debts if they are over $600 and fall within the applicable preference period is to have your bankruptcy trustee set these debts aside. It’s best to not delay filing for bankruptcy until you’re able to pay back debts, so one thing you could do is wait until you have filed, then use exempt assets or any income you’ve accumulated after filing to pay back these preferred or favored debts.

To better understand if filing for bankruptcy is the right action for you to take, it is recommended that you set up a consultation with a local bankruptcy attorney.

What’s the Difference Between Chapter 7 and Chapter 13 Bankruptcies?

Chapter 7 and chapter 13 bankruptcies both provide solutions towards debt relief, but both chapters differ in their specific benefits. Chapter 7 bankruptcies are the most common type of bankruptcy filed by consumers, and they deal with unsecured debt by selling off any assets that are not exempted from the debtor’s estate to creditors to satisfy debts. Chapter 13 bankruptcies allow for debtors to keep all current property by having them agree to a repayment plan to pay back some, if not all, of their total debt. These chapters differ in duration as well, as most chapter 7 cases achieve a discharge in a few months, while chapter 13 cases usually take about 3 years to achieve discharge in order to satisfy the repayment plan debtors undertake while under a chapter 13 bankruptcy. Chapter 7 cases tend to benefit low-income debtors who don’t have much nonexempt property, as well as those who wish to get their debt discharged sooner rather than later. One important requirement for chapter 7 bankruptcies however is that debtors who wish to file under chapter 7 need to meet a “means test” which shows that the debtor’s income is at or below their state’s median income for their specific household size. Chapter 13 payments benefit higher-income debtors who wish to protect or keep their nonexempt property, and allow for debtors to catch up on payments for property that can be repossessed or foreclosed.

To better understand if filing for bankruptcy is the right action for you, it is recommended that you set up a consultation with a local bankruptcy attorney.