Question

16. What is the fundamental difference between Chapter 7 and Chapter 13​ bankruptcy? What three major criteria differentiate a​ filer's eligibility for each​ chapter? What debts cannot be discharged in a Chapter 7​ bankruptcy?

17. What is a 529​ plan? What restrictions on​ funding, contributions, and withdrawals​ apply?

Answer 1

Answer 16)

Chapter 7 is a bankruptcy liquidation plan which removes or eliminates most of your general unsecured debts and liabilites like credit cards and medical bills without any requirement to repay balances through a repayment plan. For qualifying under Chapter 7 bankruptcy liquidation, one must meet its income requirements. Helps in quicker discharge of debts as compared to Chapter 13.

Chapter 13 is a type of a reorganization bankruptcy which is specifically designed for debtors with regular income with enough money remaining to pay back some portion of their debts via a repayment plan. Many debtors choose Chapter 13 over Chapter 7 due to its benefits like one can continue to keep their property.

Difference in criteria on filer's eligibility:

As of April 2019, one individual cannot have more than $419,275 of unsecured debt or $1,257,850 of secured debt. For Chapter 7, one must have low disposable income which is evaluated as per the Chapter 7 Means test.

Another difference between Chapter 7 and Chapter 13 is that Chapter 13 can only be filed by individuals (Including sole propreitors) whereas Chapter 7 can be filed by both individuals and business entities.

Chapter 7 is a liquidation bankruptcy whereas Chapter 13 is specifically for Reorganization.

Debts which cannot be discharged in a Chapter 7 bankruptcy:

Non-dischargeable debts are debts which cannot be eliminated or removed in the process of bankruptcy since the U.S.A. Bankruptcy Code does not permit it. Some debts which cannot be discharged under Chapter 7 are Alimony and Child Support Payments, Income tax payable .You will have to continue making these payments.

Answer 17)

A 529 Plan is a kind of college savings plan which offers attractive tax and other financial aid advantage. They are also often used to save and invest for K-12 tuition (School tuition) in addition to college costs. Two types of 529 plans are college savings plans and prepaid tuition plans.

For qualifying as a 529 plan under the Federal state rules, the program must not accept or take contributions in excess of the anticipated or expected cost of the beneficiary's education expediture which is qualified.

The withdrawals from the 529 plan must strictly be for qualified educatione expenses. Such withdrawlas are also tax free. Example: Withdrawlas for qualified education expenditure like tuition fees, books, computer or internet access and other supplies required for admitting and attending an "eligible" educational institution. Any withdrawal which does not qualify for educational expenditure is subject to penalties . Even withdrawls for medical expenditure will be non qualified and will be subject to a penalty.