Delaware Bankruptcy Law: What are the Laws regarding Bankruptcy in the State of Delaware?
Bankruptcy in Delaware
Bankruptcy is where a person or business cannot pay their debts. In such a situation, they can apply for bankruptcy whereby they can get some deal for their creditors and get a clean start by wiping off their debt.
There are two types of bankruptcy Chapter 7 and Chapter 13
Chapter 7 bankruptcy: This is a fresh start and debts like credit card balance, medical bills, and personal loans can get removed by liquidating some assets. Each state has laws that give some exemptions.
Chapter 13 bankruptcy: Here you need to have a source of income and a repayment plan is worked out to clear debts. Usually, the debts are paid throughout three to five years.
Delaware Bankruptcy Laws
As per laws, credit counseling is mandatory for all those who want to apply for bankruptcy.
The next step is to file for bankruptcy before a court. The court would examine your income and expenses before deciding whether you qualify for Chapter 7 or Chapter 13 bankruptcy. The average income for six months is considered and compared with the Delaware median income. You need to work out your average household income and then compare it with the median income. For a two-member household, the income for 12 months is $62,350. If your average household income is below this, you are eligible for Chapter 7 bankruptcy; else you need to apply the means test.
A means test considers both income and expenses. If your total income for the next 60 months as calculated in below $7,475 then you can file for Chapter 7. If it is between $7,475 and $12,475, then you need to do further calculations. If it is above $12,475, then you can file for Chapter 13 bankruptcy.
Delaware Bankruptcy Exemptions
In some states, people filing for bankruptcy have the option to choose between Federal and state laws on exemptions. In Delaware, you have to use the state exemptions only.
In the case of a married couple filing together, they can’t exceed $50,000 for a husband & wife. If filing single, it is $25,000.
The primary residence can be exempted up to $125,000. Property held as tenancy by the entirety may be exempt against debts owed by only one spouse.
A claim of up to $15,000 equity in a motor vehicle needed for your job can be exempted.
The head of the household can claim $500 worth of personal property.
Personal property like clothing, including jewelry; books; family pictures; piano, etc. can be claimed.
85% of earned but unpaid wages can be exempted under Delaware laws. Retirement accounts, SEP, IRAs, etc. can be claimed as exemptions under the pension scheme.
The Delaware Bankruptcy Procedure
Once you are through with the exemptions, you can file a petition for bankruptcy in the District Bankruptcy Court in Delaware. You can take the help of a bankruptcy attorney for this. To file for a Chapter 7 bankruptcy, you need to pay $306, which you can pay in installments. For Chapter 13 bankruptcy the fee to be pad is $281.
The court examines your petition and appoints a trustee, who will review all your paperwork in details. The trustee will call for creditors meetings. The trustee will sell non-exempt property and pay to creditors (in the case of Chapter 7). On completion of all processes, the court will issue a notice of discharge of debts.
For Chapter 13 bankruptcy, a judge will confirm the repayment plan, and you need to repay debts as per the agreed plan.