What Is The Difference Between A Chapter 7 And Chapter 13 Bankruptcy?
A Chapter 7 bankruptcy is usually the best way to quickly get rid of unsecured debts like credit cards, loans, utility and medical bills without any payment to your creditors, but it has an income limit. Meaning the amount of income, you earned may disqualify you from being eligible to file this chapter of bankruptcy.
Under a Chapter 7, your attorney may be able to exempt certain properties from the reach of the bankruptcy trustee. Any properties, not exempted, will be sold by the trustee to satisfy your creditors.
Chapter 13 is usually best for people who have secured debts on assets they cannot afford to lose such as their home and other valuables. It involves a payment plan that can range anywhere between 36 to 60 months, as opposed to Chapter 7 in which there are no payment plans involved.
Under a Chapter 13, you can keep all of your property. However, in order to keep any property that is not exempted, you will be required to pay the fair market value for any non-exempt property through your payment plan.
What Types Of Debt Is Typically Forgiven In A Chapter 7 Bankruptcy And A Chapter 13 Bankruptcy?
In Chapter 7, unsecured debts, meaning debts without any collateral, such as credit cards, utility bills, and most private loans are generally all forgiven. In Chapter 13, which involves a payment plan, you will be required to pay your creditors back all portions of any secured debt and all or a fraction of your unsecured debts.
Will I Lose Everything If I Have To File For Bankruptcy?
In Chapter 7, any assets that cannot be exempted by your trustee may be sold and used to pay back your creditors. Your attorney will assist you in making sure that most assets that can be exempted assets are protected from the reach of the trustee. In Chapter 13, the likelihood of losing any assets are slim to none and depends on your ability to pay. Your payments will be calculated based on your disposable income, and so, you get to keep your property if you have enough disposal income to cover the calculated plan payments. If not, your case will be dismissed by the court and you may be forced into filing a Chapter 7 which will almost certainly end up with you losing properties that have a collateral and you are unable to bring the balance current.
How Do I Know If Bankruptcy Is The Right Option To Help Me Get Out Of Heavy Debts?
Bankruptcy is designed to give a you a fresh start. If you are struggling with paying your debts, and you do not believe that you can make a comfortable payment plan with your creditors, then bankruptcy may be the best way to get the fresh start you deserve. If you have credit cards with high balances and high interest rates, it may be impossible to catch up just paying the minimum. Bankruptcy can allow you to get rid of debt in as little as 6 months in Chapter 7 and three to five years in Chapter 13. Bankruptcy is therefore, the fastest way to eliminate those debts than any other methods of debt repayment out there. And in 3 years, you may be qualified to purchase a home debt free.
For more information on the Difference Between Chapter 7 & Chapter 13, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (978) 323-7880 today.
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