If you are in the midst of or facing financial disaster, it’s time for you to know about Chapter 7 and Chapter 13 bankruptcy. Both types of bankruptcy will help you with your debt load, but there are some differences between the two different filings. As always, seek the advice of a reputable lawyer. They will help give you guidance and put you on the right path to financial recovery. A careful analysis will help them to decide what’s your best course of action.
Do Chapter 7 and Chapter 13 Bankruptcy Both Serve the Same Purpose?
They both help you improve your financial picture but differ in many ways as well. Chapter 7 can be considered a liquidation strategy, to get rid of at least some of your debt. Chapter 13, on the other hand, provides an opportunity to reorganize your debt and make it more manageable
Are There Restrictions for Filing Chapter 7 and Chapter 13 Bankruptcy?
In Chapter 7 filings, both businesses and individuals can use this liquidation strategy and eliminate overwhelming debt. In Chapter 13 bankruptcies, only individuals can go this route. If your business is organized as a sole proprietorship, you can use this method for business and personal debt.
What is the Financial Eligibility for Chapter 7 and Chapter 13?
Both filings have financial restrictions. In order to File for Chapter 7, the amount of your disposable income must be low enough to pass a means test. Whereas, Chapter 13 filings require that you cannot have more than a certain amount of secured and unsecured debt.
How Long Does it Take To Receive a Discharge in Chapter 7 and Chapter 13?
In Chapter 7 bankruptcy cases, it usually takes around six months to complete the process and get your discharge. However, since Chapter 13 is more about reorganizing, you get your discharge after you’ve completed all of your plan payments. This can take anywhere from three to five years.
What Happens to My Property in Bankruptcy?
In a Chapter 7 filing, the trustee can sell your nonexempt belongings to raise cash to pay creditors. Things work a bit differently in Chapter 13 cases, and you can keep your property, but you must pay unsecured creditors a certain amount to do so.
Biggest Pros and Cons of Chapter 7 Bankruptcy
The most significant benefit of filing Chapter 7 is it allows you to rapidly discharge most of your debts and move on with a fresh start.
The biggest drawback to Chapter 7 is that your nonexempt property can be sold, and there’s not a provision for preventing foreclosure or repossession.
Biggest Pros and Cons of Chapter 13 Bankruptcy
Through the reorganization offered by Chapter 13, you can keep your property, and have the chance to catch up on all your missed payments.
Of course, the drawback associated with this is that you will be required to make payments to the trustee for three-five years, and you may have to pay back a portion of unsecured debts.
How Do You Find Out Which Works Better in Your Circumstances?
At Bolden and Little, we help folks every day to regain their financial footing and get on with life! If you are considering bankruptcy, and you’re not sure which filing option would work best for you, come in for a free consultation, and we’ll look at everything with you, and make a recommendation for the best way ahead.