Chapter 7 vs. Chapter 13
Filing bankruptcy is a scary prospect but if it is done correctly it can provide you with a fresh start, end harassing phone calls and put a stop to the stress of falling behind on your bills. There are two main types of bankruptcy available to you, Chapter 7 and Chapter 13.
A Chapter 7 filing relieves a person from having to pay for most debts, including credit card balances, medical bills, payday loans, personal loans, court judgments and other unsecured debt. Certain types of debt such as student loans, government and criminal fines, taxes, and child and spousal support usually cannot be discharged in a Chapter 7 bankruptcy filing. Filing for Chapter 7 bankruptcy can immediately stop any wage garnishments or legal proceedings against you as long as the underlying debt will be discharged in your case. A Chapter 7 bankruptcy debtor is able to keep all property that is exempt, but any non-exempt assets will be sold by the bankruptcy trustee to pay off creditors.
In order to qualify for Chapter 7 bankruptcy, a debtor must pass the means test. The test is a two-step income and expense analysis that is very complicated to calculate. Our office will evaluate your situation to determine if you qualify for Chapter 7 bankruptcy protection. If you do not qualify for Chapter 7 bankruptcy, we will research other alternatives, such as Chapter 13 bankruptcy, to help you get the relief you need!
Chapter 13 bankruptcy relief allows a debtor the opportunity to pay off debts through a payment plan over a period of three to five years. Through filing a Chapter 13 bankruptcy petition, a debtor can keep all non-exempt property that would have been liquidated by a Chapter 7 trustee – usually a home or car. One of the main benefits of Chapter 13 bankruptcy is that the debtor is usually only required to pay back ten percent of his/her unsecured debt, with no interest or late fees accruing as long as he/she continues to make payments through the agreed upon plan. A debtor can also utilize the Chapter 13 option when he or she is behind on mortgage or car payments, to stop foreclosure proceedings, to get his/her license reinstated if it has been suspended for past due parking tickets, to potentially reduce the balance on a second mortgage if the property is under water, or to potentially reduce the balance on a car he/she has been financing for more than two and a half years. Once the plan is completed, the debtor will receive a discharge of debts and will be able to keep his or her property. The Chapter 13 bankruptcy is designed for people who have a continual income, equity in their home or vehicles, have previously filed for Chapter 7 bankruptcy within the past seven years, or are not eligible to file for Chapter 7 bankruptcy.