Friday, September 2, 2016

Chapter 13 vs. 7: What You Need to Know About Bankruptcy



Are you facing overwhelming medical bills? Have you acquired more debt than your monthly income can cover? 

When you've done all you can to pay your debts and it's not enough, you may decide to consider filing for bankruptcy. To decide whether filing Chapter 7 or Chapter 13 is better for your particular circumstances, compare these pros and cons.


Chapter 7


If you're willing to give up some of your assets in order to satisfy your creditors, Chapter 7 may be your best option. 

Considered the "liquidation bankruptcy," this filing means you'll relinquish certain possessions such as real estate, vehicles, stock, and other personal property. Chapter 7 is also an option even if you have few or no assets to offer.




The court will sell these assets and use the proceeds to satisfy your creditors. 

The creditors must accept the final settlement they receive and discharge your obligation, even if you have few belongings to sell.

Chapter 7 is not intended to wipe you out by taking everything you own. Instead, it provides a clean slate for starting your life over. 

To this purpose, property which is considered necessary for living is exempt from being sold. This usually includes at least one vehicle, some furniture, equipment you need for work, and perhaps even some equity in your home.

As state laws differ on what may be considered exempt, you may want to contact a lawyer from a firm like Demers Gagnier Inc. to assist you in determining whether your income qualifies for this filing and which properties you may be allowed to retain.


Chapter 13


Chapter 13 is for those seeking to protect their home from foreclosure, or who have a business they don't want to be liquidated. 

It's also ideal for those who desire to pay off their debts rather than have them discharged.



This type of filing consolidates your debts into one affordable monthly payment, typically over a five-year period. 

Once the plan is established, you make payments to an independent agent who disburses the funds to your creditors. These payments can also include a system to help you catch up on your mortgage payments over time.


After You File


Neither Chapter 7 nor Chapter 13 discharges student loans, divorce and child support settlements, or your home mortgage. In addition, expect your bankruptcy to remain on your credit report for seven years. 

Despite these drawbacks, the best benefit of a bankruptcy filing is the relief you get from having a chance to start over.

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