Chapter 7 Essentials
As the most sought-after form of bankruptcy, many individuals choose to file for Chapter 7 in order to eliminate their debts. A person who cannot afford to repay their debts may file for Chapter 7 bankruptcy to have their debts discharged. The most essential fact about Chapter 7 is that not everyone is eligible. A debtor must pass a means test that compares their income to the state's median income level. If your income is less than the state's median income level or if your obligations exceed your disposable income, you may be eligible for Chapter 7; otherwise, you may only qualify for Chapter 13.
If you qualify for Chapter 7 bankruptcy, you will be required to submit numerous documents and attend a credit counseling course. Although assets are more likely to be liquidated in Chapter 7, this is by no means a certainty. In fact, there are numerous bankruptcy exemptions that shield from creditors significant assets such as a home, car, and personal property. Note, however, that secured debts are much more difficult to discharge in a Chapter 7 bankruptcy, putting them at greater risk from creditors.
Chapter 13 Essentials
While Chapter 13 is not the preferred bankruptcy filing for the majority of debtors, it may offer more advantages than Chapter 7. Chapter 13 is the best option for anyone whose obligations exceed the state's median income level or whose disposable income is determined to be sufficient for debt repayment.
The greatest advantage of filing Chapter 13 is complete asset protection. Due to the fact that debts are being repaid rather than eliminated, there is less risk of creditors liquidating them or the need for bankruptcy exemptions. Additionally, secured debts and debts that do not qualify for Chapter 7 are significantly simpler to manage in a Chapter 13 case.
In Chapter 13 bankruptcy, you will develop a repayment plan that includes a single payment for all of your debts. In three to five years, either you or the bankruptcy trustee will pay creditors until all debts are repaid. Because the debts are being repaid, it will likely be simpler to rebuild your credit after the debt discharge, as most potential lenders view debt repayment more favorably than debt elimination.""
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