February 28, 2015

bankruptcyThroughout the United States, most bankruptcies that are filed are either Chapter 7 or Chapter 13 cases. Determining which the best choice is for you is dependent on your assets, income, debts, and financial goals. Simply put, the dividing line between your filing for a Chapter 7 or Chapter 13 bankruptcy will be your income level.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is considered to be a liquidation bankruptcy, which essentially wipes away any general unsecured debts you may have such as medical expenses and credit card bills. In order to be eligible for this type of bankruptcy, you must have little to no disposable income. Both individuals and business entities are eligible to file this type of bankruptcy.

A trustee will be appointed to administer your case when filing for a Chapter 7 bankruptcy. Apart from reviewing your bankruptcy papers and your supporting documents, the trustee will have to take any property you own that is not exempt for collection and distribute the proceeds to pay your creditors back. If you do not have any non-exempt property, then your creditors will not be paid.

The main benefit of this type of bankruptcy is that you are able to quickly discharge the majority of your debts and enjoy a fresh start.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy, on the other hand, is referred to as a reorganization bankruptcy or a wage-earner’s plan. It is primarily designed for debtors who have regular income, and who are able to pay back at least a portion of their debts through the use of a repayment plan of either three or five years. Filing a Chapter 13 case may be your only choice if you have too much money to qualify for a Chapter 7 bankruptcy. Many debtors, however, opt to file for this type of bankruptcy because it offers numerous benefits not available in a Chapter 7 case. Only individuals and sole proprietors are eligible to file a Chapter 13 bankruptcy.

While you are able to keep all your property in a Chapter 13 bankruptcy, you must pay a portion of or all of your debts through a repayment plan. The amount to be paid will depend on your how much your income is, how much property you own, and the types and amounts of debt you owe.

The main benefit of this type of bankruptcy is that you are able to keep your property, while also catching up on numerous debts through your income. If you want to forestall and prevent foreclosure on your home or other real property, Chapter 13 might be right for you. Although foreclosure is delayed with Chapter 7, it does not completely prevent it without liquidating your property.

Categories: Bankruptcy