Chapter 7 vs. Chapter 13
Filing for Bankruptcy would be one of your biggest financial decisions as in addition to relieving you off your past monetary mistakes and burden, it gives a kick start to a better future.
Like all the other big decisions that you had to take till now and still others which you will take in future, option awaits you here also. Though selecting one out of two would not be a hard task but you have to keep in mind that your pick will determine the course of your future. So, choose which one’s the best for you, wisely.
Whether it is liquidation plan (Chapter 7) or wage-earners plan (Chapter 13) that you choose, among other depends on the chapter you qualify for as much as your individual situation. If you qualify for just one chapter then there is no dilemma and you can go straight ahead with your plans and file for the chapter for which you qualify. However, if you qualify for both, than you will have to exercise your power to choose.
Here, we’ll help you to make the right choice so that you can start discharging your debts in as little time as possible.
Chapter 7 Bankruptcy
Chapter 7 or liquidation Bankruptcy is resorted to, by those who either have mostly unsecured debts or no regular income. It just takes few months to erase all your unsecured debts under this. Here, trustee may sell all your non-exempt property and extend the sale proceeds to your creditors. While you loose some of your property depending on the debts you have incurred over the years, you still wipe your debts clean in addition to being able to keep exempt property with you.
In case there is no equity in your house over and above the exemptions, than you can even keep your house after Chapter 7 Bankruptcy is carried out. Secured debts, student loans, however, are some of the debts that survive this Bankruptcy Chapter, which implies, that you have it standing as your personal liability even after Bankruptcy proceedings are complete. Co-signers are not protected and they may have to pay for the debts. It is the quickest way to discharge most of your debts.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy or wage-earner’s plan can be invoked by those who have income greater than state median. In the event of you having high equity in your property, go for Chapter 13, even if your income is less than applicable state median. The only condition precedent is that the unsecured debts must be below $ 336,900 and secured debts less than $ 1,010,650.
It reorganizes existing debts under Court supervision which are to be paid in the period of 3-5 years. Unlike Chapter 7, you will have to pay your debts, though the amount may be lowered, however, you get to keep almost all of your property. If some of the debts remain after you have successfully completed Chapter 13 re-organization plan, those debts are automatically discharged. Co-signers are in most of the cases protected from having to pay your debts. You may even be successful in stopping a foreclosure sale after filing under this Chapter.