Bankruptcy Information For All 50 States

Overview of Chapter 7 and 13 Including Intrastate Differences

The Situation Is Not as Hopeless as You Think – Navigating Your Way Back from the Financial Abyss

Is your phone ringing incessantly off the hook with calls from creditors so that you are afraid to answer the phone because you have no answers for the rude debt collectors who scream and demean you?  Have you long since stopped checking your mail because all that you receive is more bad news in the form of collection notices and threats of litigation by your creditors?  Do you park the car down the street or hide it in a neighbor’s garage because you are afraid that any day the finance company will send a tow truck to repossess your vehicle?  Have you stopped using bank accounts because every time you make a deposit, someone levies against your bank account taking the money you need to buy food and maintain your electricity and water service?  Are you afraid to leave the house because process servers are skulking about ready to serve you with a lawsuit?  Were you notified by your mortgage company that a foreclosure sale has been scheduled for your home?

When you are drowning in debt, the situation can feel completely hopeless with no way to climb out from under your financial woes.  Fortunately, you are not alone.  Millions of Americans currently face this scenario or have confronted it in the recent past.  Many people at their wits end and at the brink of financial ruin have sought out the services of an experienced bankruptcy attorney and fought their way back from the financial abyss.  The hardest part of confronting these types of overwhelming financial problems is that the easiest thing to do is nothing.  Unfortunately, ignoring the problem only makes it worse as interest accrues, penalties are added to unpaid financial obligations, and foreclosure proceedings on your home move forward.

There are many financial planning and asset protection strategies that a skilled bankruptcy attorney may be able to employ to help you even if you face significant financial obstacles.  The key is to understand that there are options and financial strategies available, but you must reach out and ask for assistance.  Most bankruptcy attorneys offer a free initial consultation so that they can evaluate your situation and advise you regarding your options.  Because the most valuable tool at your disposal is a general understanding of the bankruptcy process.  We have provided a general overview of Chapter 7 and Chapter 13 bankruptcy process, which are the two primary forms of consumer bankruptcy protection.

Understanding the Chapter 7 Bankruptcy Process

When most people use the term “bankruptcy” in everyday conversation, Chapter 7 bankruptcy is the type of bankruptcy protection that consumers typically envision.  Chapter 7 bankruptcy theoretically involves liquidation of a debtor’s non-exempt assets for distribution to creditors and extinguishment of any remaining unsecured financial obligations.  This type of bankruptcy is commonly referred to as “liquidation” or “consumer” bankruptcy.  This the most beneficial form of bankruptcy protection because it will effectively eliminate most unsecured debts and financial obligations without a requirement that a debtor make repayment.  The types of unsecured debts that may typically be extinguished in a Chapter 7 bankruptcy include but are not limited to the following:

  • Outstanding credit card balances
  • Billings and invoices from hospitals, ambulance service or other medical bills
  • Personal unsecured loans
  • Utility bills that have gone unpaid
  • Judgments obtained by unsecured debtors
  • Unsecured lines of credit
  • Deficiency judgments (i.e. balance owed after a car repo or home foreclosure)

The theory behind a Chapter 7 bankruptcy is that the Bankruptcy Trustee will exercise authority over you assets and debts, which is typically called your “bankruptcy estate.”  The reason characterization of Chapter 7 bankruptcy as a “liquidation bankruptcy” is more theoretical than practical is because the vast majority of Chapter 7 bankruptcies are what is termed “No Asset Chapter 7s” or “No Asset 7s”.  Most though not all debtors who end up filing for Chapter 7 bankruptcy relief have no exempt property for the trustee to liquidate and distribute to creditors.  This is by design because careful pre-bankruptcy planning by a bankruptcy attorney and artful use of the bankruptcy exemption system frequently can structure your bankruptcy so that you keep most or all of your property.  Sometimes you may have substantial equity or assets that cannot be protected, or you may not qualify for a Chapter 7 so your bankruptcy attorney will recommend that you pursue a Chapter 13 bankruptcy, which typically involves paying some though not all of your unsecured debtors over a 3 or 5 year term supervised by the Bankruptcy Trustee.

Chapter 7 Pre-Bankruptcy Planning

The key issue many people do not realize is that a Chapter 7 bankruptcy is as much about asset protection as it is seeking relief from unpaid financial obligations.  Most people work hard throughout their lifetime to accumulate their assets and net worth.  An effective Chapter 7 Bankruptcy can be one of the most powerful asset protection mechanisms for safeguarding the financial estate that may have taken a lifetime to build.  The Bankruptcy Code is filled with bankruptcy exemptions that permit a debtor filing bankruptcy to protect a wide range of types of property from liquidation by the Bankruptcy Trustee.  While it is permissible to file your own bankruptcy, this is a good way to squander exemptions and end up surrendering property that you could easily have kept had you followed the legal advice of an experienced bankruptcy attorney.

There is a list of federal exemption, and all fifty states have their own separate exemption schedule.  In seventeen states, you have an option to make an election between the federal and state exemption schedule.  The average consumer will have a difficult time evaluating which exemption schedule best fits their needs.  Further, artful use of the exemption system will allow you to determine the best way to assign specific assets between exemptions to maximize the value of the assets you protect.  Sometimes you may have too much value to cover all assets in a particular exemption category, but you may be able to protect the excess equity with a wild card exemption or by listing an asset in another applicable category.  Sometimes the choice to include an asset in one particular exemption category will create available coverage in another category.

Even before filing your Chapter 7 bankruptcy, it is important to carefully analyze your assets to determine if there are substantial assets that will not be covered by an exemption.  One of the most valuable aspects of working with an experienced bankruptcy attorney is that can provide asset management advice on how to legitimately convert non-exempt assets into exempt assets so that you do not lose the equity that you have invested in the asset.  This process of engaging in transactions close to the window within which you file bankruptcy must be done carefully because the Bankruptcy Trustee has the ability to deem a transaction shortly before or after you file Chapter 7 a fraudulent transaction and unwind the transaction.  This can have extremely adverse consequences but an experienced Chapter 7 bankruptcy attorney can help you legally protect many if not all of your assets when filing Chapter 7.

Determining If You Qualify for a Chapter 7 Bankruptcy under the Means Test

While it is generally preferable to file a Chapter 7 bankruptcy rather than a Chapter 13 bankruptcy, you must qualify for Chapter 7 bankruptcy under a two pronged means test.  The means test was implemented to prevent debtors that had sufficient disposable income after paying secured debtors to make a significant payment toward their unsecured debtors from discharging all of their unsecured debts in a Chapter 7 bankruptcy.  The first prong of the two-pronged means test is a comparison of your income to the median income for your state.  If your income averaged over the prior six month period is less than the median income for your state, you will quality for a Chapter 7 bankruptcy.

If your income exceeds the median income for your state, you must establish that you will not have enough disposable income once certain basic living expenses are covered to be able to make a significant payment to unsecured creditors.  The key to determining to determining if you still quality when your income is over the median state income is to evaluate whether after deducting certain allowable basic expenses like rent, food and utilities you will have at least a hundred dollars left in disposable income each month to be paid toward unsecured creditors.  If you will not have at least this much disposable income left, you are eligible for a Chapter 7 bankruptcy discharge. However, anyone whose disposable income exceeds this amount will need to file for Chapter 13 relief instead of Chapter 7.

Because a Chapter 7 can save you thousands if not tens of thousands of dollars in trustee payments to unsecured creditors, it is important that you consult with an experienced bankruptcy attorney who may be able to assist you in pre-bankruptcy asset management to help you qualify for Chapter 7 under the means test.  Most bankruptcy attorneys can do a preliminary calculation and quickly advise you regarding the likelihood that you can qualify for Chapter 7.

Procedures and Documents Involved in the Chapter 7 Bankruptcy Process

Many consumers presume that they can just pick up a “bankruptcy packet,” prepare the paperwork themselves, and file it with the bankruptcy court.  This misconception last only until you see the massive stack of forms that must be filed as part of a Chapter 7.  These documents easily range from 30-50 pages of complex and unfamiliar terminology.  There are many pages of schedules where you must list and provide values for different categories of property, debts, creditors and more.  Mistakes in your paperwork can result in delays in obtaining your Chapter 7 discharge and eventually the dismissal of your bankruptcy entirely.

Dismissal of your bankruptcy can be particularly problematic because you may be barred from re-filing for some period of time.  During this interim period, creditors may continue to move forward with debt enforcement procedures, meaning your house may be subject to a foreclosure sale, your wages may be attached via garnishment, your business may be forced into receivership, and liens may be placed against your land or real estate.  While bankruptcy is effective at protecting your assets and income, it is not as effective at recapturing lost income or assets taken by creditors while you are waiting to file, or in this case, re-file for bankruptcy protection.

Most Chapter 7 bankruptcies never involve entering a formal bankruptcy courtroom.  In most cases, your only appearance will be in front of the Bankruptcy Trustee at a 341(a) Meeting of Creditors.  The name for this meeting is somewhat misleading because in most cases few if any creditors appear at the 341(a) Meeting of Creditors.  If you own a home, however, it is likely that your mortgage holder will appear at the 341(a) to discuss your intentions regarding your home.  Even if creditors attend, they are typically fairly passive participants with the Bankruptcy Trustee asking most of the questions.

The Promise of a Fresh Start: The Chapter 7 Discharge

Within a few weeks of your 341(a) Meeting of Creditors, you will receive a formal notice that your Chapter 7 Bankruptcy discharge has been granted.  The discharge will make the injunction against enforcement of your dischargeable unsecured debts permanent so that you are no longer obligated to pay the debts.  A Chapter 7 discharge often is referred to providing a “fresh start” to debtors.  Many people that receive a Chapter 7 Bankruptcy discharge go on to re-establish their credit, own homes, obtain financial prosperity and reclaim their lives.

Why Pursue a Chapter 13 Bankruptcy?

If you need to file a Chapter 13 bankruptcy, the process and forms are far more complicated than filing for a Chapter 7 Bankruptcy.  While you must file many of the types of petitions and schedules covering your debts, income, and creditors as in a Chapter 7, you must also craft a Chapter 13 repayment plan that is feasible given your income and secured debts.  Chapter 13 Bankruptcy involves developing a repayment plan where you repay your secured debtors, including your mortgage company, car finance company for vehicles you are keeping, and similar types of secured obligations.  A debtor in Chapter 13 must also include payment toward one’s unsecured debt, such as credit card debt, during the 3 or 5 year term of one’s Chapter 13 plan.  Any balance on unsecured debts that would be eligible for discharge in a Chapter 7 also is discharged after the successful conclusion of a Chapter 13 bankruptcy repayment plan.

While generally it is preferable to file a Chapter 7 bankruptcy because you can avoid the obligation to pay substantial sums back through the repayment plan of a Chapter 13, there are certain situations where this is not an option.  If you cannot qualify for a Chapter 7 Bankruptcy under the Chapter 7 means test, you may still seek Chapter 13 Bankruptcy relief with the primary difference being that you will repay a portion of your unsecured debts as opposed to having the entire amounts discharged.

The other situation where debtors typically pursue a Chapter 13 bankruptcy rather than a Chapter 7 is when they have substantial equity in their home that would not be exempted from liquidation and distribution to creditors in by Chapter 7 bankruptcy.  While you may have a homestead on your home that will protect a certain amount of equity and even more if you are married, the amount of protection may not be sufficient to cover all of your equity in your home.  The federal exemption system and most state exemption systems also provide an exemption for a certain amount of equity in your family residence.  While many states offer exemptions for equity in your family home of $50,000 or more, this may not be sufficient to safeguard all of the equity in your home.  In this situation, a Chapter 13 bankruptcy provides a way to seek bankruptcy relief without exposing your family home as an asset that is available to creditors.

Eligibility Criteria for a Chapter 13 Bankruptcy

While one of the most fundamental requirements of a Chapter 13 bankruptcy is that you have sufficient income to fund your Chapter 13 repayment plan, it is not the only eligibility criteria. If you wish to qualify for Chapter 13 bankruptcy relief, you must also meet the following qualifications:

  • Individuals Not Businesses: Only individuals are eligible for Chapter 13 bankruptcy relief, however, a partner or sole proprietor may include business debts that are secured with the debtor’s personal guarantee.
  • Maximum Debts Amounts: Both your unsecured debt and secured debt must be under certain maximum amounts.

The Procedure and Paperwork for Chapter 13 Are Complicated

Although no legitimate bankruptcy is easy to prepare because of the enormous volume of paperwork along with the complexity and unfamiliar terminology, a Chapter 13 bankruptcy presents far greater challenges than a Chapter 7 bankruptcy.  The paperwork requires you to provide all of the information about your income, assets, creditors and debts required in a Chapter 7 bankruptcy, but you must also develop a 3 to 5 year repayment plan that must be approved by the Bankruptcy Trustee and to which your creditors can object.  The plan must be well thought out so that you can establish that it is financially feasible.  Feasibility of a Chapter 13 plan means that your available income is sufficient after covering basic household living expenditures to make plan payments to secured creditors and included unsecured creditors along with keeping your current mortgage payments current.

Every month you will make a monthly trustee payment to the Bankruptcy Trustee that will include amounts allocated and approved in your bankruptcy plan to be distributed to your debtors.  The Bankruptcy Trustee will distribute the payment to your individual debtors each month.  Once you have prepared and filed all of your Chapter 13 bankruptcy paperwork, the Bankruptcy Trustee will review your filing and bankruptcy repayment plan to determine if your plan is feasible based on your income.  Once this process has been completed, a 341 Meeting of Creditors will be scheduled.  While there will generally not be many creditors that actually appear, there may be certain creditors that are at the informal meeting with the Bankruptcy Trustee, particularly your mortgage lender.  Again, this hearing will be fairly straightforward in most cases if you have an attorney present.  Typically, it will take less than ten minutes.

Who Gets Repaid and How Much?

A Chapter 13 repayment plan must differentiate between individual classes of creditors that are assigned different priorities under your Chapter 13 plan:

Secured Creditors: Secured creditors, such as your mortgage company or auto finance company, must have all arrearages fully repaid under your plan and current payment must be paid in a timely manner.  This obligation is relieved if you choose to surrender the asset.  This means that during the term of your 3 or 5 year plan you will be making effectively two payments to secured creditors for assets you keep like your family home.  The amount of the house payment arrearages will be divided over the number of months of your plan and made part of your monthly plan payment.  Successful completion of your Chapter 13 plan also entails making the current mortgage payments as they come due.

Unsecured Priority Debts: A Chapter 13 plan must also provide for paying certain types of unsecured debts in full, which are referred to as priority unsecured debts.  Priority unsecured debts include:

  • Alimony and child support
  • Employee pension plan contributions for your employees
  • Unpaid wages, commission and salary to employees
  • Some tax obligations
  • Fines, assessment and penalties owed to public entities
  • Personal injury or wrongful death claims related to DUI

It is important to understand that for purposes of developing a Chapter 13 payment plan, priority unsecured debtors are treated essentially like secured debtors so you must pay such obligations in full.  This is an area where the legal advice and guidance of an experienced Chapter 13 bankruptcy attorney can be invaluable.  Because priority unsecured debts and secured debts must be paid in full under your plan, your bankruptcy attorney may direct you to divert any resources to this type of obligation prior to filing bankruptcy.

Many times people facing a financial crisis and unable to pay one’s creditors will feel pressure to pay the creditors that are harassing them the most just to alleviate the pressure and stress.  However, it makes no sense to pay a credit card company instead of making alimony payments or wage payments to employees because you may not be required to repay the credit card obligation in full.  Since any remaining balance on such an obligation is dischargeable upon completion of your Chapter 13 plan, you should give these types of debts the same priority as the bankruptcy court.

Strategic considerations can be very important both in the pre-planning and document preparation phases of a Chapter 13 bankruptcy.  The Chapter 13 bankruptcy plan that you develop will be carefully analyzed by the Bankruptcy Trustee so that a determination can be made regarding your ability to make all plan payments, maintain current secured obligations like your mortgage and car payment for any vehicle you are keeping that is financed, and afford your basic living expenses.  If the Bankruptcy Trustee is not convinced you can manage all three obligations, your Chapter 13 plan may not be confirmed.  This may mean you have to amend your plan or worse you may not be able to seek Chapter 13 bankruptcy relief.

An experienced Chapter 13 Bankruptcy attorney may be able to help you effectively deal with these issues.  For example, your bankruptcy attorney may have you file a Chapter 7 bankruptcy first if you qualify to eliminate a substantial amount of your unsecured debt, which may make your debt load more manageable so that you have sufficient income to fund a plan.  There are other strategies that a bankruptcy attorney may be able to employ to assist you in more easily getting your Chapter 13bankruptcy plan approved.

Chapter 13 Discharge: Protecting Your Home and Your Family’s Future

The family home is the most valuable asset for many so it is important to protect the security if offers.  A Chapter 13 Bankruptcy may be an effective way for debtors struggling to make their mortgage payments protect this valuable asset.  If you make all of your plan payments and do not fall behind on current mortgage payments, you will receive discharge after your last plan payment.  This discharge like a Chapter 7 discharge will release you from the obligation to pay any remaining obligations on non-priority unsecured obligations.

A Chapter 13 bankruptcy can provide an invaluable tool for people that have fallen way behind on their mortgage, and may be facing foreclosure or even a pending foreclosure sale date.  Even if you are months or more than a year behind on your mortgage payments because of a drastic increase in interest rates, loss of employment, serious illness or other severe financial hardship, your family home may provide the key asset upon which your family can rebuild and secure a secure financial future.

Federal and State Exemption Systems

The Federal Bankruptcy Code provides a system of exemptions that you may use to preserve your assets, and many states also offer their own exemption scheme.  In many states (17 currently), someone filing a bankruptcy has the option of making a choice between the Federal or state exemption schedule based on which will be more beneficial to the debtor.  We have provided the federal bankruptcy exemption schedule below.

Federal Exemptions

(1)The debtor’s aggregate interest, not to exceed $21,625 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.

(2) The debtor’s interest, not to exceed $3,450 in value, in one motor vehicle.

(3) The debtor’s interest, not to exceed $550 in value in any particular item or $11,525 in aggregate value, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(4) The debtor’s aggregate interest, not to exceed $1,450 in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(5) The debtor’s aggregate interest in any property, not to exceed in value $1,150 plus up to $10,825 of any unused amount of the exemption provided under paragraph (1) of this subsection.

(6) The debtor’s aggregate interest, not to exceed $2,175 in value, in any implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor.

(7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract.

(8) The debtor’s aggregate interest, not to exceed in value $11,525 less any amount of property of the estate transferred in the manner specified in section 542(d) of this title, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.

(9) Professionally prescribed health aids for the debtor or a dependent of the debtor.

(10) The debtor’s right to receive–

(A) a social security benefit, unemployment compensation, or a local public assistance benefit;

(B) a veterans’ benefit;

(C) a disability, illness, or unemployment benefit;

(D) alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the

debtor and any dependent of the debtor;

(E) a payment under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless–

(i)              such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor’s rights under such plan or contract arose;

(ii)            such payment is on account of age or length of service; and

(iii)           such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue

Code of 1986.

(11) The debtor’s right to receive, or property that is traceable to–

(A)   an award under a crime victim’s reparation law;

(B)   a payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;

(C)   a payment under a life insurance contract that insured the life of an individual of whom the debtor was a

dependent on the date of such individual’s death, to the extent reasonably necessary for the support of the

debtor and any dependent.

Certain states allow you to make a choice between this federal exemption system and the state system.  States that permit you to make a choice include:

  • Arkansas
  • Connecticut
  • District of Columbia
  • Hawaii
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • Pennsylvania
  • Rhode Island
  • Texas
  • Vermont
  • Washington
  • Wisconsin

If you are trying to determine if you qualify for a Chapter 7 under the means test, you should consult the chart below.  If your income based on family size is less than the median income for your state than you are eligible for a Chapter 7 discharge under the means test.

Median Income By State For Determining Chapter 7 Eligibility

State Single   Family Size  
2-person family
3-person family
4-person family








































District of Columbia









































































































New Hampshire





New Jersey





New Mexico





New York





North Carolina





North Dakota

























Rhode Island





South Carolina





South Dakota



































West Virginia















Territories Single   Family Size  
2-persons 3-persons 4-persons





Northern Mariana Islands





Puerto Rico





Virgin Islands





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  • Karen

    I owe about 27,000 dollars plus 5,000 on my car and 15,000 on student loans. I am recently separated and owe about 1.033.00 dollars per month. I will not get an income until the end of Oct. approx. 800.00. I am currently looking for a job. What to do?

  • Karen

    Just wondering if I should file bankruptcy and start over.

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