What is the difference between Chapter 7 and Chapter 13 bankruptcy? You’re not alone if you’re unclear about the differences between Chapter 7 and Chapter 13 bankruptcy. Both Chapters 7 and 13 provide debt relief choices, but they approach it in different ways. Which one you can go after will depend on your particular financial situation.
While Chapter 13 bankruptcy is frequently referred to as “wage-bankruptcy,” earner’s Chapter 7 bankruptcy is also referred to as “straight bankruptcy.” Once the debt is paid off and the bankruptcy is dismissed, both might give filers a new financial start. However, neither choice enables you to escape from paying certain taxes, child support, or alimony.
Chapter 7 bankruptcy, often known as liquidation bankruptcy, enables those who make too little money to make ends meet and have unsecured debt like outstanding credit card balances and medical bills to get rid of it. No debt payback is necessary if you file for Chapter 7 bankruptcy, most people can keep all of their assets, and all debts that qualify are fully discharged.
A Chapter 13 bankruptcy involves reorganization. It enables debt restructuring for people. Debt collection, vehicle repossession, and property foreclosures can all be halted by filing for Chapter 13 bankruptcy. Mortgage payments that are past due can eventually be made up. Debt can be lowered and repaid over a longer period of time and in smaller sums. Debts that are not dischargeable can be reorganized but not discharged.
Your property, such as your home, will probably be yours to keep if you file for Chapter 13 bankruptcy. However, you are obligated to pay back creditors an amount equal to the value of your non-exempt property. You provide the trustee all funds, and he or she will pay the debtors. This indicates that once Chapter 13 protection has been granted, you won’t be contacted by your creditors directly.
Bankruptcy in Birmingham cannot be used to discharge some debts. These debts may consist of alimony payments, divorce settlements, child support obligations, some taxes, other obligations owed to the government, and debts accumulated as a result of criminal penalties.
For Chapter 7 and Chapter 13 bankruptcy, there are distinct requirements for eligibility. Your current monthly income must be less than or equal to the median income in your state in order to qualify for Chapter 7. If not, you must pass a means test to see if you will have enough money left over after paying for necessities to pay your obligations. You might be eligible to file for Chapter 13 if you fail the means test. You must have a regular source of income, unsecured debts under $419,275, and secured debt totaling no more than $1,257,850 in order to be eligible for Chapter 13 bankruptcy. You will keep your possessions, but you will need to pay your unsecured creditors an amount equal to the value of your non-exempt assets.
Many people find the process of credit repair to be unpleasant and intimidating, which is why our clients come to us for assistance. Our Prattville bankruptcy attorney will assist you in navigating the Chapter 7 or Chapter 13 filing procedure and avoiding costly errors that could jeopardize your ability to receive debt relief. We will also assist you in comprehending the advantages’ bankruptcy might offer your family as well as your filing possibilities.
When you retain a bankruptcy attorney from our firm to handle your case, they will: Ensure you comprehend the distinctions between Chapter 7 and Chapter 13. They will go over the benefits and drawbacks of each. They will also describe state and federal legislation for the form of bankruptcy you wish to file. They will help you determine which filing option is best for your circumstances by reviewing your income and debts, outlining how your assets, income, and property are impacted, and so much more. As you begin to recover your finances, a Montgomery bankruptcy attorney will manage every aspect of your case, giving you peace of mind.
Attorney Steven A. Harris regularly blogs in the areas of family law, bankruptcy, probate, and real estate closings on this website. Mr. Harris tries to provide informative information to the public in easily digestible formats. Hopefully you enjoyed this article and feel free to supply feedback. We appreciate our readers & love to hear from you!