The Difference Between Chapter 7 And Chapter 13 Under The New Bankruptcy Code

The Difference Between Chapter 7 And Chapter 13 Under The New Bankruptcy Code "Since 2005, when bankruptcy laws changed, it has become significantly more difficult for a debtor to file Chapter 7 bankruptcy. Prior to the modifications, critics of the bankruptcy code complained that filing for bankruptcy was simply too simple. Many of these detractors, who were also creditors, lobbied Congress for law changes. From the early 1980s to 2005, the number of individuals filing for bankruptcy increased by over 300 percent. Each year, millions of dollars were lost due to the large number of bankruptcy filings. It has always been true that a job loss, a medical problem, a divorce, or a natural calamity are the most common causes of Chapter 7 bankruptcy among Americans. Due to those who got themselves into a financial mess by overspending, Congress was compelled to alter the law. The bankruptcy code that was published in October 2005 was intended to protect the good, hardworking Americans who were dealt a bad hand, but not those who overspent and desired a second chance.The bankruptcy code was enacted to safeguard both consumers and creditors. Individuals who are buried in debt can eliminate their debts and start over by filing for bankruptcy. The law was also intended to attempt to return some of the money owed to creditors who took a chance. In Chapter 7 bankruptcies, the majority of creditors incur a total loss, as many filings wind up being no-asset cases. The bankruptcy law can be found in Title 11's Bankruptcy Code. Regardless of whether a debtor petitions under Chapter 13 or Chapter 7, both are still administered by federal district courts. Most individuals attempt to qualify for Chapter 7 because there is no repayment plan and a discharge is typically granted within four to six months. There are typically two reasons a person would file Chapter 13 bankruptcy. The first is that their income is excessive and they do not qualify for Chapter 7 bankruptcy under the means test. The individual possesses a substantial amount of property that they wish to protect and preserve. In Chapter 13 bankruptcy, the debtor and his or her bankruptcy attorney will negotiate with creditors to pay back a reduced amount over a three- to five-year repayment period. In contrast, a Chapter 13 bankruptcy allows the individual to retain all of their property while paying a court-approved reduced amount.The Chapter 13 bankruptcy is significantly simpler to qualify for than Chapter 7. There are still a variety of advantages for the Chapter 13 petitioner. As long as the debtor continues to make payments according to the court-approved payment plan, they will be able to retain their property and walk away debt-free. The court trustee supervises the entire procedure and ensures that the debtor's payment plan is feasible when it is established. The last thing the court desires is for a debtor to declare bankruptcy and be unable to make court-ordered payments. The individual pays the trustee, who then distributes the funds to the creditors. In the case of a piece of real estate, the court will sometimes eradicate the second and third trust deed, thereby reducing the outstanding balance on the property. This can be of great benefit to a person who is upside down on their mortgage but has a steady income. Regardless of which chapter of bankruptcy you choose to file, you should always seek the opinion of a local bankruptcy attorney regarding your specific situation.
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