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You can file for bankruptcy protection to wipe out the unsecured debts if you are eligible. However, if you are behind on the payment of your mortgage, you must file Chapter 13 if you want to save your home. Otherwise, you can file Chapter7.
You would be eligible to file for Chapter 7 bankruptcy protection, if you meet the Means test—the income test. If your income is equal to or less than the current income guidelines for your family size in your state, you would be eligible to file for a Chapter 7 bankruptcy all things being equal. The income used in calculating the Means test is the income for the 6 months before the filing of the bankruptcy petition. This means that if you are filing for bankruptcy protection this month, August 2013, the income that would be used is your income from February 2013 to July 2013. If you are filing next month, September 2013, the income that would be used in the Means Test calculation would be the income from March 2013 to August 2013, etc. In Chapter 7, if the Court grants you a Discharge your debts will be wiped out with some exceptions such as some taxes, child support, alimony, which are not dischargeable. You would get a clean state, a fresh start.
These are current income guidelines for the State of Washington:
Family size of one person $52,724.00
Family size of two persons $65,123.00
Family size of three persons $71,289.00
Family size of four persons $83,270.00
Add $8,100.00 for additional individual
The filling fee for Chapter 7 is $306.00.
An individual (“consumer debtor” or “debtor”) would be able to file a Chapter 13 if the debtor has disposable income—extra income after necessary expenses every month to fund a Chapter 13 plan and the debtor must also meet the debt limit requirement. In order to file for Chapter 13, a debtor's unsecured debts must be less than $383,175.00 and secured debts must be less than $1,149,525.00. In Chapter 13, the debtor prepares a payment plan and makes payments to his/her creditors on a 3 or 5-year plan. If the debtor's income is equal to or less than the current income guidelines for his/her family size in his state, the debtor would do a 3-year plan. However, if the debtor's income is more than the current income guidelines for his/her family size in his state, he would do a 5-year plan. His mortgage arrears and unsecured debts would be paid through the Chapter 13 plan.
The filing fee for Chapter 13 is $281.00