Hello World! Welcome Friends! When making decisions about our financial stability and future, we must make decisions only after we have studied our circumstances. If you are falling behind on your debt payments, you may have started getting phone calls from debt collectors? Have you recently gotten a letter from PO box 4115 concord CA? Then it may be time to start seriously considering whether or not bankruptcy is a good option for you. If you want a little guidance on whether or not your situation could benefit from bankruptcy, then check out a “Should I File For Bankruptcy Quiz.” This quiz can take your information and show you what options are best for you.
Due to one or more wrong steps, it may be necessary to file for bankruptcy. However, there are several bankruptcy chapters, each of which is useful in a particular situation.
Before you make the choice, make sure that you understand the key differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy.
What is Bankruptcy?
Bankruptcy comes when an individual, or a business, cannot pay their debts. There are many reasons why someone cannot pay their debts, from wrong decisions and excessive debts to unexpected life or market circumstances.
Certainly, bankruptcy is there to help you improve your financial situation and to help you pay off your debts through certain measures. Although bankruptcy may seem daunting at first glance, the consequences of being in debt can be much more severe. Bankruptcy is a second chance, which will help you relieve yourself of the burden of debts partially or fully.
By understanding the different types of bankruptcies, specifically Chapters 7 and 13, you will understand which of these two ways is suited better for your circumstances.
What are the Differences Between Chapter 13 and Chapter 7 Bankruptcy?
There are 6 different ways of filing for bankruptcy. All of them, as well as these two we are talking about, aim to help you build a better financial future.
However, every type of bankruptcy has consequences that you should pay attention to before making a decision.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also called “Liquidation Bankruptcy”. As the name suggests, the way this bankruptcy is conducted is through the liquidation of “excess” assets and things you own. When you file for Chapter 7 bankruptcy, the court will appoint a bank trustee over your non-exempt assets
Depending on the size of the debt, you will be able to keep some of the more important things, those that are not in excess. The things that are mostly sold are the property you do not live in, surplus cars, luxury items, family heirlooms, jewelry, and generally all the things that the agent does not consider superfluous.
On the other hand, you will keep home equity up to $ 25,150, insurance, retirement plan, personal properties, public benefits, as well as household furniture and appliances that are necessary for life.
Essentially, Chapter 7 is mostly the right decision for those who do not have enough monthly income for any gradual debt repayment.
Chapter 13 Bankruptcy
While Chapter 7 is called liquidation, we could call this a reorganization. Chapter 13 Bankruptcy works by having a bank trustee plan, based on your overall financial situation, to plan the best way to use each disposable income to pay off debts.
Disposable income is all the money you have left after paying all the necessary living expenses, and through bankruptcy, you will commit yourself to paying every single dollar of your disposable income to your debts.
In this way, through the repatriation plan, you will be able to pay off all, or part of, your debts in a period of 3 to 5 years. The most important advantage of Chapter 13 is that you will keep all your assets. Through Chapter 13 bankruptcy, the debtors will have a chance to catch up on missed mortgage, car and nondischargeable priority debt payments
Reasons You May Choose Chapter 13 Bankruptcy
You Can Keep Your Assets:
One of the most important if not the most important advantage of Chapter 13 is that you will keep all your assets. Through Chapter 7 the bank will require you to return your car, house, apartment or sell them.
Assets are often inherited, or they are a result of decades of work, in any case, it is a heavy hit on your financial future and situation. And when it comes to cars, certain families need multiple cars to get to work or school, this can also have a heavy impact on your time and schedule.
You Are Not Eligible For Chapter 7 Bankruptcy:
Of course, there is a chance that you can not choose Chapter 7 bankruptcy at all. For each bankruptcy chapter, there are certain conditions that the debtor must meet.
However, if you do not qualify for Chapter 7, this does not mean that you do not qualify for Chapter 13. Some of the requirements for Chapter 7 are:
- Income in your household must be less than the average income of a household of your size. Otherwise, you must pass the means test.
- You must not have filed for Chapter 7 bankruptcy in the previous eight years.
- You must not have filed for Chapter 13 bankruptcy in the previous six years.
- If your previous attempt to file for bankruptcy was rejected, you must wait 181 days.
Protect Your Codebtor:
Compared to Chapter 7, there is a huge advantage regarding codebters. Codebtor is someone who owes debt along with you. Most often, this codebtor is your spouse or a family member. Your codebtor is not obligated to go bankrupt along with you, and in the case of Chapter 7, the bank can still demand payments from them.
While on the other hand, in Chapter 13 all codebtors are placed under “Automatic stay”. This way, your codebtors will be protected from creditors pursuing them for payment.
Pay Debt Out Over Time:
If you are able to pay off your debts, but, you are not able to pay off the full payments of those debts. Through Chapter 13 you will be able to pay them off over a period of 3 to 5 years.
This way you will be able to get rid of your debts without liquidating your assets. Chapter 13 is useful when you owe child support or alimony, mortgage, car payment, unpaid taxes and other debts. Some of the requirements for Chapter 13 are:
- You have sufficient income to make the monthly debt payments specified in your bankruptcy plan.
- Your unsecured debts are less than $419,275, and your secured debts are less than $1,257,850.
- If your previous attempt to file for bankruptcy was rejected, you must wait 181 days.
- You provided proof that you filed federal and state income tax returns for the past four years.
Whatever you decide, just keep in mind that a step towards financial freedom is a step in the right direction! Keep working hard to get out of debt and you will be moving towards a better financial future.
Click the links below for any posts you have missed:
Link the Inside of Your House to Your Garden
How to Save On Home Renovations
Get Your Backyard Summer Ready
The Best Investments You Can Make
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