When people become entangled in debt, it can seem insurmountable. Even hardworking people can fall victim to unforeseen circumstances, like job losses or medical bills, and the payments add up very quickly, according to the website of Greenway Law, LLC. For some, bankruptcy might be the most viable option in order to overcome their debt. After deciding to file for bankruptcy, there remains one more choice: to file for Chapter 7 or Chapter 13. Both offer different advantages to different people, depending on their amount owed and their current assets.
Chapter 7 bankruptcy is designed to help people with few assets. All unsecured debts are relieved when filing for Chapter 7 bankruptcy, which constitutes anything not backed by a big ticket item. This can often include credit card debts, medical bills, and the like. However, after these debts are forgiven, the liquidation process begins. The remainder of your assets will be divided up into exempt and non-exempt entities. Non-exempt items will be sold and profits will be returned to your creditors. For this reason, people with little property typically file for Chapter 7 bankruptcy.
Chapter 13 bankruptcy will help people to make manageable payments on debts and protect their assets. The typical time frame used when completing Chapter 13 bankruptcy gives the person filing between three and five years to repay their debt, under a plan established by the debtor and their trustee. Disposable income is what people use to make payments, that is, the money they have left over after necessities like food and shelter every month. Unlike filing under a Chapter 7 plan, under Chapter 13 bankruptcy, property is not liquidated.
Although there are significant differences between these two types of consumer bankruptcy, it is always best to consult with a lawyer to determine which cases meet the requirements of Chapters 7 and 13 bankruptcy.Read More