If you have debts that you feel you can no longer pay, you can consider the option of bankruptcy to improve your financial situation. However, this should come as a last resort since you can avoid it. All the same, filing for bankruptcy allows individuals and businesses to live debt-free while they re-strategize to build their financial statuses. The bankruptcy code is organized in different chapters that are suitable for various types of debtors. For instance, Chapter 7 and 13 bankruptcies are designed for different debtors in different financial situations. Read on to learn which one is better between Chapter 7 and Chapter 13 Bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 is also known as liquidation bankruptcy where the debtor decides to sell off their assets to raise money to pay off the debts they owe to the creditors. The liquidation process is the most common type that eliminates the debtor’s assets so that they can have a fresh start. The court usually appoints a trustee when a business files for Chapter 7 and all operations cease unless otherwise, the trustee chooses to continue operating. The debtors who can file for Chapter 7 bankruptcy should have a lower income that is less than the minimum amount set by different states to determine the eligibility of the applicant.
Liquidation Of Assets
In Chapter 7, you will return a car or house to the creditor or you can pay the wholesale value of the asset. When you choose Chapter 7, then you should know that you are likely to lose everything unless you opt to pay the equal value of the property as agreed by the trustees. The other thing that you need to know is that you can pay the wholesale value of your assets in a lump sum. When you have filed your first Chapter 7 bankruptcy, you need to wait eight years. However, when your spouse disagrees, then the debt may not be discharged until you show that you cannot pay it even after bankruptcy.
Hire A Professional Bankruptcy Lawyer
Before you decide to file for bankruptcy as a result of uncertainty over debt, it is essential to hire a professional lawyer that specializes in this area so that you can make an informed decision. When you file for bankruptcy, certain consequences can affect your present and future financial life that you should know. As such, you need sound legal representation so that you do not worsen your situation already dire.
Laws differ from one country to the next, and in countries like the US, they differ from state to state. If you are based in Fort Lauderdale, for instance, you need to make sure to contact a Fort Lauderdale bankruptcy lawyer that specializes in this area so that you can gain a deeper understanding of the laws. If you get a quality lawyer to begin with, you can enjoy peace of mind since they can do all the work while you focus on reconstructing your financial future. Additionally, if you hire an experienced lawyer in handling such cases, you can get expert advice that can positively shape your financial future.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is also known as reorganization and to be eligible for this, you should have a steady income. You will not lose your house or car when you file for Chapter 13. Other unsecured debts like medical bills as well as credit cards may be discharged upon successful completion of your repayment plan of outstanding debt. This means that you will no longer need to repay the discharged debt. However, you may not get a discharge for these under chapter 7. The priority debts that you should pay include spousal and child support, costs of your bankruptcy filing that include legal fees. You need to pay off the loan for the car or house so that you do not lose the items.
When you file for Chapter 13, the creditors will not reach you during the bankruptcy period which can give you peace of mind as you reorganize your financial situation. After you file your first chapter 13 bankruptcy, you can wait for two years so that you can get a second discharge. At the end of chapter 13, any remaining balance is erased. Additionally, the Chapter 13 plan allows you to keep all your assets.
Depending on your financial situation, you can consider Chapter 7 or Chapter 13 bankruptcy since they are designed to help people who are struggling to repay their loans. As you are now aware, Chapter 7 is better if you have a lower income level and the procedure is simple since it takes less time than Chapter 13. The majority of these kinds of cases belong to Chapter 7 whereas about 29% of cases belong to Chapter 13 bankruptcies. On the other hand, Chapter 13 bankruptcy is advantageous in that you do not lose your property.