Is Chapter 7 Or Chapter 13 Bankruptcy Right For You?
Bankruptcy may be something to consider if you find yourself buried in a mountain of debt. Bankruptcy can be the most effective way for individuals or businesses to survive a short term debt crisis at the same time as squaring away their relationship with their creditors. The major advantage of bankruptcy is that it allows you to essentially eliminate your debts and get on with a fresh financial start.
In the United States of America, most personal bankruptcies are either Chapter 7 or Chapter 13 bankruptcies. These terms refer to the respective chapters of the United States Code which describes the legal operation of the bankruptcy. Although personal bankruptcies fall under the purview of Federal bankruptcy laws, State laws applying to property rights will often come into play during the course of bankruptcy proceedings.
The relatively simple Chapter 7 bankruptcy is by far the most commonly filed type of personal bankruptcy. Chapter 7 bankruptcies involve the complete liquidation of debt upon sale of the debtor’s non-exempt assets. Chapter 7 filings are restricted to people of low to middle income with few assets to sell.
In practice, most debtors filing bankruptcy under Chapter 7 have no home, a relatively modest income, and little or no non-exempt assets of value to sell. In these cases, the debts are completely discharged while the debtor keeps his or her personal property.
Of course eliminating one’s debts through bankruptcy is a tremendous relief and gives a person the opportunity to have a fresh start, but a bankruptcy filing is a black mark on the debtor’s credit report for ten years. You should be aware that courts do not allow the discharge of certain debts. These include federal student aid loans, tax debts, debts from personal injury judgments, and debts obtained through the fraudulent use of credit. These will not be discharged in a bankruptcy. In other words the system attempts to strike a balance between discouraging the abuse of bankruptcy and allowing people a relatively new beginning.
Chapter 13 bankruptcy is a bit different and a bit more involved. It applies to people and businesses with a certain number of non-exempt assets, and who therefore have a chance of contributing to at least a partial payment of their debts. Chapter 13 bankruptcy cases involve a legally binding repayment plan, in addition to the sale of non-exempt assets. Chapter 13 filings allow a homeowner with regular income to avoid seizure of some assets - especially the family home while his or her debt is restructured. Then the debt is restructured in an affordable way so that the debtor can afford the payments without selling his or her home. Most people who own homes, earn an above average income, or own valuable personal property, file chapter 13 bankruptcy.
The best advice is to consult with an experienced bankruptcy lawyer before making any rash decisions. For expert advice from a firm that has handled thousands of bankruptcy cases across the USA call 800-290-1000 for a free evaluation of your case, or visit Legal Helpers online.
