Delaware has seen a sharp increase in bankruptcy filings in the last two years. In addition, in fact, their unemployment rate has tripled in the last three years. No doubt, there are thousands of residents still struggling financially and considering bankruptcy. This is not the right solution for everyone, but for some people, it can be the only way to remove the financial pressure. The question is, how an individual can determine if it is the correct course for them.
Finding a Bankruptcy Attorney
Many details and consequences must be considered when determining if bankruptcy is the right choice. Often the only one that can provide the input needed is an experienced bankruptcy lawyer. However, it is important to take the time to get recommendations from others and do the research and interviews to find an attorney that meets the filer’s needs.
Bankruptcy Options
The next choice is to determine whether to file for Chapter 7 or Chapter 13 bankruptcy. There are crucial differences that must be taken into account:
- Chapter 7 is the most common and the quickest form of bankruptcy debt relief. It is also known as liquidation, by which a bankruptcy trustee may sell some unprotected property to pay creditors before discharging, or erasing, much of the remaining debt. This is a good choice for those with few or no assets to lose to liquidation
- Chapter 13 is a process by which a consumer, with the help of their attorney and the bankruptcy trustee, reorganizes their finances and debts and establishes a plan to pay them back over a three- to five-year period. Those with significant unprotected property would find this a better choice.
Delaware Exemptions
For those filing Chapter 7, both federal and state exemptions exist to allow filers to protect some of their property. In Delaware, only state exemptions are allowed, and there is a limit of $25,000 that a filer may claim. The specific types of exemptions include:
| Homestead | Up to $50,000 |
| Personal Property | Clothing; jewellery; books; family heirlooms; burial plot; church pew; and up to $500 in other personal property; college investment accounts |
| Wages | 85% of wages earned but unpaid |
| Pensions | Tax exempt retirement accounts; Traditional and Roth IRAs up to $1,095,000/person; Kent County employees; police; volunteer firefighters; state employees |
| Public Benefits | Worker’s compensation; unemployment; general assistance; aid to the blind, aged, and disabled; crime victims’ compensation |
| Tools of Trade | Up to $75 of tools, implements, and fixtures in New Castle and Sussex Counties; up to $50 in Kent County |
| Insurance | Life insurance proceeds; health or disability benefits; group life insurance; annuities up to $350/month; fraternal benefits |
Filing the Petition
Once a debtor and their lawyer have determined the best course of action, the debtor must complete credit counselling before they can file their bankruptcy petition. Following that, several steps occur:
- A bankruptcy trustee is appointed to oversee the disbursement of funds or the formation of a repayment plan
- A 341 meeting is scheduled to inform the creditors of the plan and allow them to ask any questions they may have
- The bankruptcy proceeding is completed and the Chapter 7 filer has a fresh start, while the Chapter 13 filer is free to complete their repayment plan and fulfill their obligations
