There are distinctions between chapter 7 and chapter 13 bankruptcies. Chapter 7 bankruptcy occurs when all of a person's debts are completely wiped out. However, in this circumstance, even though the debt has been eliminated, you will be required to surrender your assets to repay the debt you owe. In contrast to chapter 13 bankruptcy, however, the debt you owe remains and is restructured. Also, in chapter 13 bankruptcy, you will be able to retain your assets and will not be required to surrender them.
Chapter 13 bankruptcy is viewed by many as a debt consolidation loan. Chapter 13 bankruptcy is never, under any circumstances, a loan. The debt that you currently owe will remain, but it will be reorganized and placed into a more manageable repayment plan so that you are better able to make monthly payments. Even though your debt still exists, creditors and credit card companies will no longer be able to contact you or call you to harass you about making payments.
Chapter 13 bankruptcy differs from chapter 7 in that you are permitted to retain your home and are not subject to foreclosure. As soon as the bankruptcy process has begun, the foreclosure process will terminate and your mounting debts will be eliminated. During the period of bankruptcy, your monthly mortgage payments must continue and must be paid.
If you have a substantial quantity of secured debt, it will be reorganized and structured so that you are better able to make payments. In many instances, the interest rates on your payments will be reduced into smaller payments, and a payment extension may be granted, resulting in smaller monthly bills and simpler payments.
Individuals and unincorporated businesses are limited in their ability to file for this type of bankruptcy. The remaining total quantity of unsecured debt must be less than $307,000. In addition, the secured debt must be lower than $923,000. In certain instances and circumstances, the limitations may be modified based on the consumer price index.
A person must participate in credit counseling in order to be eligible for bankruptcy. The counseling must be completed at an agency approved by the office of the United States Trustee. There may be a fee associated with credit counseling, but if the fee is too high or you are unable to pay it, the agency will do its best to reduce payments to meet your financial requirements.
Chapter 13 bankruptcy may be appropriate if you want to maintain your assets and have some leverage over your financial situation with less stress. The rescheduling of your repayment plan to make it simpler for you to make payments. Although filing for bankruptcy may not seem desirable, it may be your best option.
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