What You Need to Know
While bankruptcy law will eradicate a portion of your debt, it will not eliminate all of it. Before registering for bankruptcy, you should have a thorough understanding of your financial obligations. Generally speaking, both forms of bankruptcy can eliminate credit card debt. However, you may still be required to deal with debts such as alimony, child support, student loans, taxes, and secured debt. In certain instances, Chapter 13 may be beneficial whereas Chapter 7 is not. This is advice that your bankruptcy attorney will provide.
Filing Under Chapter 7
The purpose of this liquidation bankruptcy law is to eliminate the majority of your unsecured debt, such as medical invoices and credit card payments. Nota bene: In order to file for this type of bankruptcy, you must demonstrate that you have essentially no disposable income.
If you choose to proceed, a trustee will be appointed to manage your case. In addition to evaluating the necessary paperwork and supporting documents, the trustee is responsible for selling any nonexempt property you own to repay your creditors. If you do not have any assets, your creditors will receive nothing. As a result, Chapter 7 bankruptcy is primarily designed for low-income debtors who wish to discharge unsecured obligations and have virtually no assets.
Filing Under Chapter 13
This is a reorganization bankruptcy law for those with a steady income and the ability to reimburse at least a portion of their debts through a reorganization plan. If you are unable to qualify for Chapter 7 bankruptcy due to a high income, this may be your only option. It is important to note that Chapter 13 offers several benefits unrelated to your income.
In Chapter 13 bankruptcy, you will be able to retain all of your property, including nonexempt assets. Additionally, the quantity you owe will be determined by your income, expenses, and the nature of your debt.
Due to the importance of reorganization, applicants who are able to make monthly payments were targeted. Such applicants can typically get back on track if they have missed auto or mortgage payments, and they can continue to make payments on time in the future. Additionally, you will be required to repay your nondischargeable debts, such as child support and alimony arrears.
The Advantages of Filing for Chapter 13
You can avoid mortgage foreclosure. The lender will be compelled to accept a plan in which you make all missed payments within a specified timeframe, while maintaining your current payment schedule. To establish this type of plan, you must demonstrate that your future income will allow you to meet these requirements.
Due to the fact that your future income will be used to fund your repayment plan, you will be able to retain any nonexempt property you own.
In certain instances, debtors can reduce a debt based on the replacement value of the property that secures it, and then pay off the debt using their replacement plan. Suppose, for instance, that you owe $15,000 on a car loan but the car is only worth $11,000. You may submit a plan to pay the creditor $11,000, and the remaining balance of the loan will be discharged.
However, as your bankruptcy attorney will inform you, you cannot impose this type of loan if you purchased the vehicle within the 30-month period preceding your bankruptcy filing. Regarding other personal property, you cannot impose such a plan for a secured debt if you acquired the underlying property within the year preceding your bankruptcy filing.
The decision to file for bankruptcy under Chapter 7 or Chapter 13 should not be made carelessly. It is strongly suggested that you consult with an experienced attorney who can counsel you on the option that best fits your circumstances.""
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