Oregon residents who find themselves overwhelmed with debt can seek relief by filing for Chapter 7 or a Chapter 13 bankruptcy. A Chapter 7 bankruptcy wipes out most debts and offers the chance of a fresh start. Those who file for Chapter 13 bankruptcy pay down some or all of their debts over a period of three to five years. Individuals generally file for Chapter 13 because they have assets they would like to protect or they earn too much money to file a Chapter 7 petition.
Those who wish to obtain debt relief by filing a Chapter 7 bankruptcy must first pass a means test. To pass this test, they have to earn less than their state’s median income for a family of the same size or not have enough money to make ends meet after paying allowable expenses. While assets can be liquidated in a Chapter 7 bankruptcy to pay creditors at least some of what they are owed, this rarely happens unless the assets have significant value. There are also federal and state Chapter 7 exemptions that protect assets such as homes, automobiles, personal possessions and tools used to earn a living.
Individuals who file a Chapter 13 bankruptcy do not begin to make payments until a judge has approved their payment plan. Once all of the payments have been made, the remaining debt will be discharged.
Many people who are thinking of filing for Chapter 13 bankruptcy worry that their payment plans will not leave them enough money to cover their living expenses. An attorney with debt relief experience could provide assurance that judges consider this when evaluating Chapter 13 payment plans. Legal counsel could also explain that Chapter 13 filers can petition the court to have their payment plans modified if their situations change.