Kansas city Law Firm, Jeppson Law, Explains The Means Test And Chapters 7 & 13

Kansas city Law Firm, Jeppson Law, Explains The Means Test And Chapters 7 & 13

Here is an explanation of the decision between Chapters 7 and 13: First, split all of the debt between 2 buckets. Bucket 1 is the debt that debtors are going to keep paying.

Most taxes, child support arrears and secured debts such as mortgages and car loans for property that they want to keep will go into bucket 1. Bucket 2 is all of the stuff they don't want to and don't have to pay.

Bucket 2 also contains the secured debt for vehicles that are being surrendered as part of the bankruptcy. Bucket 1 is stuff that they will continue paying, Bucket 2 is everything else.

Chapter 7 dumps out bucket 2 and lets debtors deal with bucket 1 on their own. It is faster, easier and cheaper but doesn't help with any of their bucket 1 debt.

Chapter 13 allows the set up of a payment plan to pay off the debts or arrearages in bucket 1 and only as much as they can afford to pay of the debts in bucket 2. Any bucket 2 debts that they can't afford to pay over the life of the Chapter 13 payment plan gets dumped out just like it would have in a Chapter 7.

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