Chapter 7 or Chapter 13 Bankruptcy?
Bankruptcy may be something to consider if you find yourself buried in a mountain of debt. It is a helpful way for people and businesses who are deep in debt to survive financially and at the same time satisfy their debts to an extent reasonably possible. By discharging your debts and allowing you a new financial start, the process of bankruptcy can also serve to unburden the larger economy of dead financial weight.
In the USA, most personal bankruptcies are either Chapter 7 or Chapter 13 bankruptcies. These terms refer to the respective chapters of the United States Code which describes the legal operation of the bankruptcy. Although personal bankruptcies fall under the purview of Federal bankruptcy laws, State laws applying to property rights will often come into play during the course of bankruptcy proceedings.
Chapter 7 bankruptcy is relatively simple and is by far the most commonly filed type of personal bankruptcy. Chapter 7 bankruptcies involve the complete liquidation of debt upon sale of the debtor’s non-exempt assets. Chapter 7 filings are restricted to people of low to middle income with little property of value to sell.
People who file Chapter 7 bankruptcy normally have no home and very few assets of value to sell to help offset their debts. In other words, they have no means in the forseeable future to pay off their debt or even make a significant dent in that debt. In these cases, the debts are completely discharged while the debtor keeps his or her personal property.
Of course eliminating one’s debts through bankruptcy is a tremendous relief and gives a person the opportunity to have a fresh start, but a bankruptcy filing is a black mark on the debtor’s credit report for ten years. People entertaining the possibility of filing bankruptcy should also be aware that courts do not allow the discharge of certain debts. These include federal student aid loans, tax debts, debts from personal injury judgments, and debts obtained through the fraudulent use of credit. These will not be discharged in a bankruptcy. In other words you can see that the system is designed to strongly discourage the abuse of bankruptcy laws while allowing people deep in debt to obtain a relatively fresh start.
Unlike Chapter 7 bankruptcies, Chapter 13 bankruptcies are a little more involved and pertain to people and businesses with non-exempt assets. They involve a legally binding repayment plan, in addition to the sale of non-exempt assets. Chapter 13 filings allow a homeowner with regular income to avoid seizure of some assets - especially the family home while his or her debt is restructured. Then the debt is restructured according to a reasonable schedule so that the debtor can afford the payments without selling his or her home. Most people who own homes, earn an above average income, or own valuable personal property, file chapter 13 bankruptcy.
The best advice is to consult with an experienced bankruptcy lawyer before making any rash decisions. For expert advice from a firm that has handled thousands of bankruptcy cases across the USA call 800-290-1000 for a free evaluation of your case, or visit Legal Helpers online.