How Chapter 13 Bankruptcy Compares To Chapter 7
Many people facing a dire financial situation ask themselves if they should file for bankruptcy or try to tough it out. The answer is not easy when you are buried under a great deal of debt with seemingly no other way to get out of it. If you file, the repercussions will be with you for years. So, before filing, it is best to know exactly what are the advantages and disadvantages.
When it comes to individuals filing for bankruptcy, the two primary types of filings are Chapter 7 and Chapter 13.
Type 7 basically allows you to keep most of your assets. This is the type of scenario that most people think of when they hear the term bankruptcy. Under Chapter 7, you report all of our assets, income, debts, and expenses to the court. The court first determines, based on your income and expenses, whether you are eligible for a Chapter 7 filing. There is sort of a means test where, if you qualify, you will be eligible to file under Chapter 7.
In fact, in some cases, after you file for a Chapter 7 bankruptcy, the courts may decide that you either make too much money or have too many assets to quality. If this case, they may force you to change your Chapter 7 filing to a Chapter 13 filing.
Assuming that you're approved to file a Chapter 7 bankruptcy, the court will direct the bankruptcy trustee to liquidate your non-exempt assets and allocate the money collected from them to the various creditors. Any debts remaining after all non-exempt assets are sold will be discharged. In most cases, you will be allowed to keep your primary home, your car, and many other necessary items.
If you have luxury items, however, they will normally be among the first to be liquidated and the proceeds used to pay your creditors. Absent any surprise circumstances, in most cases the entire process will be completed in six months or less.
Things work a little bit differently when you file under Chapter 13. For one, your debts are not discharged. Instead, they are restructured. The forms that you used to file for type 13 are the same as you use in a type 7 filing. With this plan you will be required to propose a three to five year plan which details how you will repay the debts that you owe.
Your plan will in all likelihood be approved as long at it seems reasonable. The primary advantage of this kind of filing is that it lets you retain all of your assets. In addition, it allows you to arrange your bills in a manner that you can pay down without a lot of hardship. The disadvantage, of course, is that you still have to pay off your debts.
At one time, bankruptcy carried such a stigma that most citizens tried their best to avoid it at all costs. In recent years, however, the number of bankruptcy filings has grown so much that it no longer carries the same stigma that it once did.
When it comes to individuals filing for bankruptcy, the two primary types of filings are Chapter 7 and Chapter 13.
Type 7 basically allows you to keep most of your assets. This is the type of scenario that most people think of when they hear the term bankruptcy. Under Chapter 7, you report all of our assets, income, debts, and expenses to the court. The court first determines, based on your income and expenses, whether you are eligible for a Chapter 7 filing. There is sort of a means test where, if you qualify, you will be eligible to file under Chapter 7.
In fact, in some cases, after you file for a Chapter 7 bankruptcy, the courts may decide that you either make too much money or have too many assets to quality. If this case, they may force you to change your Chapter 7 filing to a Chapter 13 filing.
Assuming that you're approved to file a Chapter 7 bankruptcy, the court will direct the bankruptcy trustee to liquidate your non-exempt assets and allocate the money collected from them to the various creditors. Any debts remaining after all non-exempt assets are sold will be discharged. In most cases, you will be allowed to keep your primary home, your car, and many other necessary items.
If you have luxury items, however, they will normally be among the first to be liquidated and the proceeds used to pay your creditors. Absent any surprise circumstances, in most cases the entire process will be completed in six months or less.
Things work a little bit differently when you file under Chapter 13. For one, your debts are not discharged. Instead, they are restructured. The forms that you used to file for type 13 are the same as you use in a type 7 filing. With this plan you will be required to propose a three to five year plan which details how you will repay the debts that you owe.
Your plan will in all likelihood be approved as long at it seems reasonable. The primary advantage of this kind of filing is that it lets you retain all of your assets. In addition, it allows you to arrange your bills in a manner that you can pay down without a lot of hardship. The disadvantage, of course, is that you still have to pay off your debts.
At one time, bankruptcy carried such a stigma that most citizens tried their best to avoid it at all costs. In recent years, however, the number of bankruptcy filings has grown so much that it no longer carries the same stigma that it once did.
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