Bankruptcy In Delaware

Citizens of Delaware that are having trouble making ends meet with no solution in sight may consider filing for bankruptcy.  Bankruptcy is a way to legally help people pay or eliminate their debts.  What is important to remember is that bankruptcy is not a “get out of jail free card.”  There are ramifications to bankruptcy that people should be aware of.  Each state has different laws regarding bankruptcy, so it is important to understand those laws for whatever state you plan to file in.

It can be difficult to determine if bankruptcy is right for a particular situation.  People that are struggling will need to take a look at their situation and ask themselves a few questions.  If they are paying the minimum amount each month on bills, are having trouble budgeting for the next few years, have lost their job or are close to having their home foreclosed, then bankruptcy might be an option to further investigate.

People also need to remember that bankruptcy doesn’t cover all debts.  There are still some payments that must be taken care of by the debtor.  Things like:

•Back taxes
•Student loans
•Alimony
•Fines
•Cash advances
•Luxury purchases over $550 within 90 days of bankruptcy filing

Residents of Delaware can choose between chapter 7 bankruptcy and chapter 13 bankruptcy.  There are differences between the two and people will need to qualify in order to file.

Chapter 13 in Delaware

Chapter 13 bankruptcy allows people to get help paying off their debts with a three to five year plan.  Instead of clearing all debts and starting over, people are able to reorganize and consolidate their debts into one monthly payment.  This is a good option for people that loans like a mortgage and don’t want to lose their house.  Chapter 13 can also be an option to help pay back things like student loans, child support and other loans that are not covered by Chapter 7.

People that want to file for chapter 13 bankruptcy must have a steady income along with a certain amount of disposable income left over after all living expenses are paid.  Having more than $,010,650 in secured debt or $336,900 in unsecured debt can disqualify someone from being eligible for chapter 13 bankruptcy in Delaware.

When filing for chapter 13 bankruptcy, a payment plan must also be included.  This plan shows how the person will pay back their loans within five years.  The plan must also have taxes figured in to the final amounts.  The bankruptcy court of Delaware will then assign a trustee to the case.  The trustee then reviews the plan to make sure it is accurate and has enough flexibility for changes.  After the trustee has reviewed the plan, it is sent to the person’s creditors.  The creditors then have the option to object to the plan as long as they have good cause.  Most creditors will approve of the plan if it means getting their money.  Only truly unreasonable plans will be rejected.

Once the plan is approved, the debtor will be able to keep all of their assets for the term of the plan.  The debtor then has to make a monthly payment to the trustee.  The trustee then distributes the money to the creditors while keeping a small amount to cover service fees.

Approval of this type of plan means that the debts are wiped clean and all the debtor has to worry about it paying the agreed upon monthly payment.  The creditors can no longer pursue any more money from the debtor.  Those that do not follow the repayment plan may have other options that a bankruptcy lawyer can lay out for them. Similar to a chapter 13 but without filing is a debt consolidation where you have an opportunity to consolidate all your debts and make money payments. This again may require the assistance of a financial professional before going this route. There are pros and cons for all options.

Chapter 7 in Delaware

Chapter 7 bankruptcy differs from chapter 13 in one major way.  With chapter 7, debts are basically eliminated.  This type of bankruptcy is also known as a liquidation.  It is also the fastest and easiest form of bankruptcy there is.

The way chapter 7 bankruptcy works is a trustee is assigned to a person’s case.  The trustee than takes the debtor’s property and sells it, using the money made to pay off the creditors.  The property can include cars, homes and other items.  This also has to be non-exempt property.  However, most chapter 7 cases do not involve selling any property because the debtor doesn’t own anything that is non-exempt.  These are called “no-asset” cases.

In order to be eligible for chapter 7 bankruptcy, a person must be able to pass a “means test.”  This will determine if a debtor is really unable to pay off their debts on their own.  In order to be eligible, a person’s income must be below the median for families in Delaware.  The median income numbers for Delaware are:

•1 Person: $46,249
•2 People: $60,736
•3 People: $69,826
•4 People: $88,409

Those that do not qualify for chapter 7 bankruptcy based on median income may still have the option to file for chapter 13 bankruptcy. Those that make more money than the median can still file for chapter 7, but they will need to be able to prove that their disposable income is not enough to pay their debts.  There is a formula that is used to calculate the amount of income left over after paying things like mortgages and cars.

When filing for chapter 7, petition must be filed followed by a meeting with the bankruptcy court.  All debts and creditors must be listed in the application as well as details of the person’s income.  After bankruptcy has been filed, creditors are prohibited from trying to collect their money.

Some creditors can challenge this move if they can prove to the court that there is due cause to continue collecting money.  The trustee sells all property that is not being kept by the debtor and uses the proceeds to pay towards the debt.  All debts incurred after the bankruptcy filing are the responsibility of the debtor.  Wages earned after filing also belong to the debtor and are not subject to collection.

Citizens of Delaware should not file for bankruptcy unless it is their only option to solving their debt problems.  Bankruptcy can negatively affect a credit rating for 10 years, making it very difficult to get more credit or loans for homes and cars.  It is really a least resort, but one that many people may have to take.  Be sure to consult with a financial expert of bankruptcy lawyer before making any final decisions.

With the age of the Internet Filing bankruptcy Online has become an option as well. You are allowed to file bankruptcy without the aid of a lawyer, however you should be cautious. It may be wiser to use a bankruptcy attorney whether you live in Florida or Delaware and means you decide to pursue.