Bankruptcy protection is based upon federal law, and there are two kinds of bankruptcy available for individual filers. Chapter 7 is a fast liquidation track, where assets are surrendered by debtors and sold to pay debts. Frequently, there are no or few assets given to the bankruptcy trustee by debtors for this purpose. Chapter 13 is a reorganization case with a longer track of three to five years that allows debtors to pay a proportion of creditor claims. In the latter case, debtors usually have a home and car they want to keep, and filing Chapter 13 lets them restructure repayment rates and/or timelines more favorably.
Where Do You File Bankruptcy?
In Washington, D.C., the Bankruptcy Court has one district, the U.S. District Court (or U.S. Bankruptcy Court), found at 333 Constitution Ave. The Bankruptcy Code requires debtors to file for bankruptcy relief in the locality where they reside.
Chapter 7 Eligibility
The Bankruptcy Code lists qualifications to determine a debtor's eligibility (a) to file bankruptcy; and (b) the specific type of bankruptcy case. If your average monthly income is less than the District of Columbia's median income, you can file Chapter 7. However, if your average monthly income is greater than or equal to the District of Columbia's median income, you cannot file Chapter 7 unless you pass a stringent means test.
Chapter 13 Plan Timeline
If your average monthly income is less than the District of Columbia's median income, your Chapter 13 Plan cannot be longer than 36 months, unless the Bankruptcy Court finds "good cause" to extend your plan up to 60 months. If your average monthly income is greater than or equal to the District of Columbia's median income, your Chapter 13 Plan generally must be 60 months.
Exemptions in Bankruptcy
What exactly are bankruptcy exemptions? Bankruptcy exemptions determine property a debtor can keep in a Chapter 7 case outside of creditor and bankruptcy trustee reach, or how much a debtor must pay creditors within a Chapter 13.
In Washington, D.C., debtors may either utilize local (state) exemptions or federal bankruptcy exemptions found within the Bankruptcy Code. Debtors cannot select favorites from each list and combine or mix them. If debtors use the state exemptions, however, they can also use applicable federal non-bankruptcy exemptions.
The District of Columbia's state exemptions protect homesteads, personal property, wages, alimony, child support, insurance, pensions, public benefits, tools of trade and miscellaneous categories. There are residency rules for the exemptions. Those rules mandate you reside in D.C. for a required period. You usually have to live continuously in D.C. for two years before filing bankruptcy. There are also limits on homestead exemptions for property acquired less than four years prior to bankruptcy.
This article provides a general, brief introduction to bankruptcy. For specific information regarding your situation, contact a Washington, D.C.-based bankruptcy attorney.