Chapter 7 or Chapter 13 Bankruptcy?
If you are finding yourself struggling with mounting debt, then perhaps you should consider bankruptcy. Bankruptcy can be the most effective way for individuals or businesses to survive a short term debt crisis at the same time as squaring away their relationship with their creditors. 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. While it is true that personal bankruptcies fall under the purview of Federal bankruptcy laws, State laws applying to property rights will often come into play in many bankruptcy proceedings.
The relatively simple Chapter 7 bankruptcy 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 few assets to sell.
In practice, most debtors filing bankruptcy under Chapter 7 have no home, a relatively modest income, and little or no non-exempt assets of value to sell. 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. You should be aware that courts do not allow the discharge of certain debts. Such things as federal student aid loans, tax debts, debts from personal injury judgments, and debts obtained through the fraudulent use of credit, will not be discharged. In other words the system attempts to strike a balance between discouraging the abuse of bankruptcy and allowing people a relatively new beginning.
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.
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