If you are actively considering bankruptcy as a means to regain your financial footing, you may have to choose between Chapter 7 and Chapter 13 as one of your options. You may even need professional assistance to make this decision, as you must comprehend the repercussions of each option.
Chapter 7 bankruptcies are designed for individuals with non-exempt assets that can be liquidated to eliminate debt. Exempt assets include home equity and pension funds, while the proceeds from the sale of nonexempt assets can be used to reduce or eliminate your debt burden. However, it is important to note that only 5% of Chapter 7 bankruptcy filers have any assets worth selling.
Chapter 13 bankruptcy filers, on the other hand, have the option of establishing a repayment plan in consultation with their creditors. In most cases, negotiations can result in significant reductions in the amount owed, making it simpler for the debtor to make payments. Therefore, the issue is how to choose between Chapter 7 and Chapter 13 bankruptcy.
A bankruptcy attorney with a solid track record can assist you in making a decision and guiding you through the process. Regardless of whether you choose Chapter 7 or Chapter 13, you are still required to make payments to your creditors, such as the mortgage on your property and the car payment. These payments must continue even if you are attempting to pay off all of your obligations, as you will still require a home.
Therefore, you will not fall behind on your mortgage payments. However, if you are delinquent on your mortgage payments and filing bankruptcy to avoid foreclosure, Chapter 13 is likely your best option. You can also create a repayment plan if you are ineligible to file for Chapter 7 bankruptcy.
Utilized properly, Chapter 7 and Chapter 13 can get you out of your financial bind caused by mounting obligations. Before deciding between them, you must discover as much as possible about both and how they apply to your situation.
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