Understanding Your Bankruptcy Options
Posted on: 8 January 2016
If you are thinking of filing for bankruptcy, then you have two main options, Chapter 7 and Chapter 13. To help you get a better idea of which is best for you, here is an overview of each:
Chapter 7
The basic idea of Chapter 7 bankruptcy is that your assets will be liquidated, and the proceeds will be used to pay off a portion of your debts. A trustee will be appointed by the court to oversee your case. This trustee is responsible for taking inventory of your assets, determining their worth, selling them off, and giving the proceeds to your creditors. That being said, you will be allowed to keep certain assets that are essential, such as a car that is used to get to work.
The main benefit of a Chapter 7 bankruptcy is that it will clear a wide variety of debts in a very short amount of time. A normal Chapter 7 case will only take a few months, which means that many debts will be removed in under a year. Of course, certain debts are not removed at all, such as student loans and mortgages. Chapter 7's also have strict requirements for your income. If you wish to remove student loans or mortgages or make too much money, you are better off going with a Chapter 13.
Chapter 13
Unlike Chapter 7, Chapter 13 consists of a repayment plan, where you will essentially restructure your current debts. Again, a trustee will be appointed to oversee your case. This trustee will act as a middleman between you and your creditors, holding a meeting where you can all establish how much money is owed and how it will be paid back. You will then make scheduled payments to the trustee, who will pass that money along to your creditors. If you have a certain level of income and have proven that you have the capacity to pay back your debts in part, then you will be eligible for Chapter 13, but not Chapter 7.
A Chapter 13 plan will often last several years and is primarily chosen because it allows you to greatly reduce the interest on your current debts. It will bring your debts down to a more manageable level and will give you a single payment that you need to regularly make, as opposed to a variety of payments to all of your separate creditors. Chapter 13 also has the advantage of affecting mortgages and student loans, bringing them down to a more manageable level.
For further assistance, contact a local bankruptcy lawyer, such as Curtis H. Hatfield Attorney At Law.
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