Chapter 7 Bankruptcy vs Chapter 13 Bankruptcy

Post-petition Income Tax Returns and Tax Payments refers to your annual obligations to file tax returns and pay any taxes due, even during and after your bankruptcy case. If you are in a Chapter 13 case, you are required to submit your tax returns to the Chapter 13 Trustee and pay over some or all of your tax refunds if you receive any. If you fail to submit returns and pay refunds to the Chapter 13 trustee, your bankruptcy discharge could be delayed or withheld. If you are in a Chapter 7, you may have to pay the trustee all or part of your CURRENT year's tax refund. Taxes that you owe for years before you file bankruptcy may or may not be discharged at the end of your case. Speak with us if you have questions about a particular PRE bankruptcy tax debt.

The Chapter 7 Trustee is the person in charge of reviewing your case. His/her jobs are to a) uncover any fraud, and b) liquidate any non-exempt assets to distribute money to the unsecured creditors. Fraud occurs in less than 1% of the cases, and liquidation occurs in about 7% of the cases. Generally, the Chapter 7 trustee will spend less than an hour on your case, and speak with you only one time.

The Chapter 13 Trustee is the person in charge of reviewing your chapter 13 case. His/her jobs are to a) uncover fraud [see above], b) require that your chapter 13 plan comply with the law, and c) collect your chapter 13 plan payments and distribute the money to your creditors.

Exemptions and Exempt Assets refers to state and federal statutes that permit you to protect certain types of assets from a chapter 7 liquidation and from a chapter 13 liquidation analysis. If you are a Maryland resident for at least the last two years, you will use the state law exemption statutes. If not then we will tell you which statutes you will use. We will prepare an exemption analysis of all of your assets BEFORE filing your case. 93% of all chapter 7 cases filed nationwide are called “no asset” cases because there are no assets that are not exempt. If you have assets that are not exempt, the exemption analysis we do for you will discover that issue so that we can properly address 6 it before we file your bankruptcy case. Simply put, when an asset is exempt in a Chapter 7 case, it means you get to keep it. When an asset is exempt in a Chapter 13 case, it means that the value of that asset is not factored into the Chapter 13 plan.

Chapter 7 Liquidation refers to a chapter 7 case where there are assets that are not exempt or not fully exempt. YOU are permitted to keep all assets that are exempt, and the Chapter 7 trustee is entitled to the “value” of any asset or portion of an asset that is not exempt. Your attorney will provide you with a detailed exemption analysis BEFORE your case is filed.

Chapter 7 Liquidation Redemption refers to the ability to pay for (or redeem) some or all of your non-exempt assets. Although a Chapter 7 Liquidation is rare, if your case has non-exempt assets, we sometimes can make the trustee an offer of cash in order to save the trustee’s time and money. Those offers can be in the form of a lump sum or a short term of payments. Again, it is very rare (only 7% of the cases on average) for this to happen.

Chapter 13 Liquidation Analysis refers to the law that requires your chapter 13 plan to pay general unsecured creditors at least what they would get in a chapter 7 liquidation. In other words, if you have non-exempt assets, then the total value of those non-exempt assets is the lowest total amount you must pay in your chapter 13 plan.

Discharge refers to the Bankruptcy Court Order issued at the end of your case that provides your "fresh start" by voiding out most or all of your debts. Most all types of debts are dischargeable. Some are not. The most common non-dischargeable debts are unpaid child support, unpaid alimony, many criminal and civil fines, certain tax debts, and generally student loans. Some debts BECOME not subject to the discharge if the individual creditor successfully objects, which is uncommon, but it does happen. The most dischargeability issues are for where the debt itself was incurred by some type of fraud, for luxury items worth more than $950, for malicious damages to property, for debts arising from embezzlement, larceny, or breach of fiduciary duty, and debts you didn't list on a previous bankruptcy case. We will analyze your debts and identify any debts that are not dischargeable. Only you can identify debts that might be subject to a creditor's attack. A chapter 7 discharge is different from a chapter 13 discharge. Discharge and dischargeability issues are generally not covered in our representation.