Considering the difference between Chapter 7 and 13 bankruptcy
What is the state of bankruptcy like? It is the situation when a person becomes legally insolvent. This means that the person has lower affordability, or no affordability at all, to pay off his debts.
Now, if personal finance is considered, there are mainly two types of bankruptcy programs under which you can file. One is the Chapter 7 bankruptcy, and the other is the Chapter 13 bankruptcy. So, if you are contemplating bankruptcy, it is better for you to consider the difference between Chapter 7 and Chapter 13 bankruptcy.
The two chapters
are very different programs. Not everyone is deemed eligible to file Chapter 7 bankruptcy. Thus, if you are contemplating filing Chapter 7, it would be better for you to first determine if you are eligible to file under this chapter.
The main differences between Chapter 7 and Chapter 13 bankruptcy are:
• Chapter 7 is about liquidation but Chapter 13 is about reorganization. In case of Chapter 7 bankruptcy, most of your assets are liquidated so as to pay off your creditors and lenders. However, in case of Chapter 13 bankruptcy, you are required to make payments as per the re-organization plan provided by the bankruptcy court.
• Most of the unsecured debts get discharged through Chapter 7 bankruptcy. But, in case of Chapter 13 bankruptcy, you may keep most if not all of your property and make payments on the due accounts.
• Under Chapter 7 bankruptcy, the discharge of the debts happens quickly enough. It gets completed within a few months. However, under Chapter 13 bankruptcy, you can have 3 to 5 years of payments that you need to make in order to pay some of the accounts.
• People generally opt for Chapter 7 bankruptcy when they have little or no property. On the other hand, people opt for Chapter 13 bankruptcy when they have equity in their home they want to protect, or when they don't qualify for chapter 7.
• People opt to file Chapter 7 bankruptcy when you are left with little or no options. However, in case of Chapter 13 bankruptcy, people who have regular income but are low on affordability opt for the same.
• If you are planning to file Chapter 7 bankruptcy, you will be required to take a credit counseling session with a credit counselor. You will also be required to pass a means test. It proves if your income is more or less than the average income of the state you are in. if your income is more, you will be considered ineligible. On the other hand, in case of Chapter 13 bankruptcy, you can file it if the amount of the unsecured debts you owe is currently lower than $360,475, and the amount of the secured debts is below $1,081,400.
So you should be aware of all of these differences between the two chapters. Based on these differences, you and your attorney will need to decide which one if right for your situation.
NOTE: We are not lawyers and this is not legal advice. Be sure to consult with an attorney licensed to practice law in your state.
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