Filing for bankruptcy is a serious move. Most people do not decide to file for bankruptcy lightly. In fact, many people consider their options for months before filing.
Most people have two options for bankruptcy: Chapter 7 and Chapter 13. Which option you choose is more important than you might think. After all, the way you choose to file for bankruptcy influences the way you will either pay back debtors or give back your assets.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is designed to wipe out unsecured debts, including medical bills and credit cards. You can think of this method as a type of liquidation. Many people who have lost their jobs or who are facing foreclosure seek this route.
Individuals who qualify for this form of bankruptcy typically have very little disposable income. They may not be employed or may have very little money, to the point where they cannot pay their bills.
If you file for Chapter 7, you will have a trustee who oversees your case. The trustee will sell any non-exempt property in an effort to pay back as much as possible to creditors. Your bankruptcy will then be discharged within about five months.
One of the biggest benefits of this type of bankruptcy is the fact that it allows debtors to discharge most debts quickly. The process also allows for a fresh start. At the same time, you may be able to keep your home and car if you are up to date on payments.
The biggest drawback to Chapter 7 bankruptcy is the fact that it has strict requirements. For example, individuals may not be eligible for this type of program if they make more than the median income for same-size households in the state.
Chapter 13 Bankruptcy
Individuals who have the ability to pay back some portion of debts through a payment plan will benefit most from Chapter 13 bankruptcy. This type of bankruptcy is available for individuals, including sole proprietors.
In most cases, those who file for Chapter 13 bankruptcy have the opportunity to keep their property. This is completely dependent on the creditor and payment plan.
Your bankruptcy will be discharged when you complete your payment plan, which may take up to five years. This is one major disadvantage of filing for this type of bankruptcy.
In many cases, people choose to file for Chapter 13 bankruptcy because they are not eligible for Chapter 7. Of course, in many cases, filing is actually advantageous. For instance, you might be behind on your mortgage, or perhaps you have debts you are not able to discharge. If you simply need more time to repay debts, Chapter 13 bankruptcy works for you too.
Chapter 13 is also a good idea if you want to keep property that you would have to liquidate as part of Chapter 7 bankruptcy. You might also have a co-debtor on some of your records, in which case filing for Chapter 7 bankruptcy would also influence him or her. In this situation, filing for Chapter 13 might be the better option.
Filing for Bankruptcy
The bottom line is that Chapter 7 bankruptcy is ideal for individuals who own little property but are unable to keep up with personal loans, medical bills, or credit cards. Additionally, bankruptcy does not relieve you from duties to pay alimony, student loans, or child support.
Keep in mind that bankruptcy comes with consequences. You will lose your credit cards and will not be able to get a mortgage in the near future. At the same time, it may help you move forward with a brighter financial future.
The Michelson Law Office - Bankruptcy Only specializes in bankruptcy and related legal issues. Bankruptcy is a complicated issue that requires intensive study. Call today to set up a consultation.