The main difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy is that in a Chapter 7 bankruptcy the filer will typically not pay back any of the money he/she owes to their creditors. Conversely, in a Chapter 13 bankruptcy the filer will pay back a portion of the debt he/she owes to creditors in a Chapter 13 Payment Plan that typically lasts 60 months, or 5 years.
To qualify for a Chapter 7 the filer needs to make less than $42,089.00 if an individual in Indiana and less than $40,020 if an individual in Kentucky.
1 earner: $42,089
2 people: $52,618
3 people: $58,916
4 people: $70,763
1 earner: $40,020
2 people: $46,815
3 people: $55,613
4 people: $67,783
The more members of your family the more money you can make as the chart above shows. The income chart is simply a presumption of which Chapter the filer will qualify for being either a Chapter 7 or Chapter 13. In layman’s terms, the more money you make the less likely you will be to qualify for a Chapter 7 bankruptcy.
If you are married, and filing as individual, the Bankruptcy court will still consider your “combined household” income of both you and your spouse. For example you make $25,000.00 per year and are filing for bankruptcy, but your husband makes $50,000.00 per year. Even though you only make $25,000.00, in the Bankruptcy court’s world your annual income is $75,000.00 and thus you would not qualify for a Chapter 7 bankruptcy. This is the one place in America where it is beneficial to not make as much money!
Each filer is entitled to keep a certain amount of personal property and real property when they file bankruptcy regardless of the bankruptcy being a Chapter 7 or Chapter 13. Check with your bankruptcy attorney to determine what you are allowed to keep, (“exempt”), despite filing for protection under the United States Bankruptcy Code.
By: Jon Schulte