Filing For Bankrupty. Chapter 7 or Chapter 13?

 Filing Bankruptcy:  Chapter 7 Or Chapter 13 May Not Be Your Decision

Bankruptcy is a method of repaying debt, and with that comes some choices.  First, you’ll need to find an attorney to help you work through the process. 

With the new laws in place for filing bankruptcy, the steps to filing have become more difficult, making it harder to file on your own. 

You may not have much of a choice in which type of bankruptcy you file, but this will be based on what your personal financial situation is in.  When you meet with your attorney, they will help you determine the right course of action.

 

What Is Chapter 7 Going To Do For You?

Chapter 7 bankruptcy is the liquidation of assets to repay any debts you have.  Any remaining debts will be discharged.  This is the most common type of bankruptcy because it will eliminate debt altogether. 

You should file this type of bankruptcy if you don’t have enough disposable income to pay down your debts, you are facing large medical bills or you have other valid reasons for being unable to pay debts off.

Generally, Chapter 7 is the best way to go if you qualify.  To qualify, your attorney may need to give you a means test.  This test is simply a very comprehensive look at your financial situation.  The goal is to determine if you are making enough disposable income to cover your debts or not.  If you make too much, you will not be able to file Chapter 7 bankruptcy, but will need to work through Chapter 13 instead.

Not all types of debts can be discharged through bankruptcy, though.  Child support, alimony, most taxes and student loans are unable to be filed through discharge, and you will still need to repay them. 

Your financial hardship is closely looked at, as attorneys must sign off on the information you provide being accurate.

What Is Chapter 13, Then?

There are several reasons to file Chapter 13 bankruptcy instead of Chapter 7.  In Chapter 13, your debts are not discharged and you do not lose your assets.  Rather, a debt repayment plan is put into place that will help you to pay off the debts you have, with less pressure and cost than with working with your attorneys directly. 

The court system will identify your financial situations, design a repayment plan and help you pay off your debts in two to three years.

You should consider Chapter 13 if you make too much to file Chapter 7.  In addition, if you have a sizable amount of assets you wish to keep, Chapter 13 can help you do that.  If you are facing foreclosure or repossession of these assets, Chapter 13 will stop those legal proceedings but only enough for you to get back on track.  It can’t stop the asset title holders from repossession if you don’t keep up on payments.

In Chapter 13, you will need to establish a repayment plan that works for you, but also is agreeable to the lenders you have debts with.  You will likely work with a debt counseling company to help you (the court system must approve the company.) 

These professionals will help you with payments, planning a budget and much more.  You’ll still need to take the time to make that monthly payment, though.

Choosing which type of bankruptcy is right for you can be a challenge.  Plenty of people file Chapter 13 and later end up in Chapter 7.  Yet, many other people do well and avoid having to have their debts discharged through Chapter 7 bankruptcy when they file Chapter 13. 

In either case, the goal is to find the best way to get your finances under control.

Tagged with: assets • attorneys • bankrupty • chapter 13 • chapter 7 bankruptcy • child support • choices • debts • disposable income • filing bankruptcy • financial hardship • liquidation • means test • medical bills • nbsp • new laws • personal financial situation • student loans • support alimony

Filed under: Bankruptcy

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