. Filing The Right Bankruptcy Chapter Is Key To A Successful And Satisfactory Case Closure Once you know that declaring bankruptcy is the only right way to get rid of that pile of secured/unsecured debts, you’ll now want to decide upon the right bankruptcy chapter to file, which can ensure you most benefits. If you are a person or an entrepreneur, your most obvious option would be either Chapter 7 (liquidation) or Chapter 13 (reorganization or wage earners) bankruptcy. In this article, we’ll give you ride around the benefits and eligibility rules of filing a particular bankruptcy chapter. There are a few other types of bankruptcy chapters too, but the commonest ones are Chapter 7 and Chapter 13 bankruptcies. Below are some of the basic differences and characteristics of both of the chapters – Chapter 7 bankruptcy discharges most debts. The trustee tries to trade the significant nonexempt assets in order to pay off the creditors. On the other hand, in chapter 13 bankruptcy, you pay your creditors off (some in part, some in full) through Chapter 13 repayment plan. In a typical chapter 7 bankruptcy, it takes 3-4 months for a case to be closed, whereas a chapter 13 bankruptcy case lasts up to 5-7 years with most unsecured debts getting discharged at the end. Most chapter 7 defaulters keep most or all of their assets. Filers with substantial assets or equity that are nonexempt by law can lose them to pay off some of their debts. On the other hand, no assets can be liquidated in chapter 13 bankruptcy. If the filer’s income is high, they won’t be able to benefit from chapter 7, whereas chapter 13 bankruptcy needs a regular income for the monthly payments to be made. Chapter 7 bankruptcy might stop foreclosure, however unless the filer can get current on their mortgages, the foreclosure will continue eventually; whereas chapter 13 bankruptcy needs a regular income to make monthly payments. Chapter 7 bankruptcy is for the ones with lower income than the median of their respective states, or for the ones who can pass the Means Test. On the other hand Chapter 13 has no such
income requirement, however the filer’s unsecured dues should be below $419,275 and secured dues should be below $1,257,850. Filing chapter bankruptcy involves navigating delicate legal issues and preparation of forms, however in any case you should always consult with an experienced attorney; while chapter 13 bankruptcy requires submission of a repayment plan to the bankruptcy court and will always require hiring an lawyer to complete the process successfully. Choosing the right bankruptcy chapter In many cases, the type of bankruptcy chapter is contingent on a couple of factors: Your assets and your income. Your income makes an importance as it might impede you from filing for chapter 7 case, and your properties are key because in case you have nonexempt assets, you are likely to lose it in Chapter 7, however can secure it in Chapter 13. Following are some of the scenarios that tell which bankruptcy strategy fits best:
Unemployed defaulters with few properties – Chapter 7 Unemployed homeowners with upside/down mortgage Unemployed homeowners with substantial amount of equity – chapter 7/13 Employed homeowners facing foreclosure or mortgage delinquency – chapter 13 Wealthy filers with a massive debt – Chapter 11
Recovery Law Group – one of the largely operative consumer protection law firms – recommends consulting bankruptcy attorney, regardless of any size or complexity of the case.