What Plan is Best For You?
No one wants to file for bankruptcy, but it is the first step to discarding debt or coming up with a plan to repay it. Individuals or partnerships file under one of two chapters, Chapter 7 and Chapter 13. Businesses may also file for Chapter 7 in order to liquidate. Figuring out which route is best for an individual or business is half the battle.
What’s the Difference?
Chapter 7
Filing under Chapter 7 will automatically stop creditors from pursuing efforts in collection. This is also the best option for low-income debtors with little or no assets.
Under Chapter 7 bankruptcy, liquidation is the way of getting out of debt. Liquidation in a sense is the sale of debtors property and remaining assets. One’s property and assets are split into two categories, exempt and nonexempt assets. The most commonly exempted asset is an individual’s primary home and primary automobile. However, if the value of the home or vehicle exceeds maximum value they are subject to liquidation. Debtors should be aware and expectant of loss of property. Here is how it works:
The first step is filing a petition with a bankruptcy court and having a judge see your case. The information that needs to be brought forward is the following:
- The individual’s primary address
- A detailed list of one’s monthly living expenses
- A schedule of one’s current income
- A list of all creditors that the debtors are in debt to, including the amount owed.
Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.
Chapter 13
Individuals with a regular income who are struggling with debt file under Chapter 13. Under this bankruptcy code, one can keep their assets while executing a payment plan in order to repay their debts in a timely manner — typically 3 to 5 years.
While many file under Chapter 13 because their annual income is too high for Chapter 7, many debtors choose Chapter 13 because of the many benefits it provides over Chapter 7.
The major advantage to filing under Chapter 13 rather than Chapter 7 is the ability to save your home or property from foreclosure. When filing for a petition under Chapter 13, the debtor must serve to the court the same information as one filing under Chapter 7.
Why Hire An Attorney?
Making the decision to file bankruptcy should not be one an individual does alone. The process of getting out from under debt involves multiple meetings with creditors working out negotiations and settlements. Most people do not feel comfortable making these kinds of agreements alone and especially when they are under financial stress.
A bankruptcy attorney will make sure that creditors are not taking advantage of the situation you are in and will make the communication process one less thing to worry about. Not only is it a difficult situation to fully grasp, but there is so much information that is not common knowledge which makes it that much more confusing.
Having someone who is looking out for your best intentions and knows exactly which plan will work best for you could not be more important. No one wants to lose everything and with the help of an attorney, you don’t have to. Hiring an educated expert is putting your best foot forward in the journey to getting out of debt.
