When a Kansas resident wants a clean financial slate, he may file for bankruptcy protection under Chapter 7 or Chapter 13. Both are forms of individual bankruptcy structured under the federal Bankruptcy Code, but Kansas cases are subject to Kansas’ exemption list and median income level. If you successfully complete your bankruptcy case, you may receive a discharge of your remaining unpaid debts.
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Chapter 7 bankruptcy is sometimes described as liquidation bankruptcy, since it involves liquidation – or sale – of the debtor’s nonexempt assets. Before filing, the debtor must attend credit counseling. After the bankruptcy court accepts the debtor’s case, a bankruptcy trustee liquidates the debtor’s nonexempt assets and uses the money to pay some of the debtor’s outstanding debts. The trustee will also hold a meeting with the debtor’s creditors to allow the creditors to ask questions of the debtor.
Chapter 7 Qualifications
Not everyone qualifies for Chapter 7 bankruptcy since Chapter 7 has income limitations. To qualify, the debtor must have a current monthly income that is less than the Kansas median income or pass a “means test.” As of May 1, 2012, Kansas’ median income ranged from $42,924 to $82,459, depending on family size. If the current monthly income with certain allowable expenses deducted, over five years, is less than $11,725, the debtor will pass the means test and qualify to file Chapter 7. Alternatively, if this amount is less than 25 percent of the total of certain debts but at least $7,025, the debtor will also pass the means test.
Chapter 7 Exemptions
Certain property is exempt from liquidation under Chapter 7. Kansas allows debtors to use both the Kansas list of exemptions and the federal list. Exemption limits apply only to the equity a debtor has in property, not the total value of the property. Exemptions include the debtor’s home of certain sizes, certain life insurance proceeds, some pensions and personal items, such as clothing and food.
Even if you don’t qualify to file Chapter 7 bankruptcy, you may be eligible to file under Chapter 13. Chapter 13 bankruptcy does not have income limitations but requires the debtor to have some form of regular income. The debtor must attend credit counseling and develop a repayment plan that addresses repayment of his debts over three to five years. A bankruptcy trustee will hold a meeting of creditors, accept the debtor’s monthly payments and distribute them to the creditors.
Both Chapter 7 and Chapter 13 permit a discharge of unpaid debts once the requirements of each type of bankruptcy are complete. A discharge excuses the debtor from repaying certain debts if he completes the bankruptcy case requirements, even though the debt has not been fully repaid. However, there are certain debts that cannot be discharged, such as child support, alimony, certain taxes and government student loans.