Author Box
Articles Categories
All Categories
Articles Resources

Should You Consider Chapter 7 or Chapter 13 Bankruptcy?

March 27, 2012 | Comments: 0 | Views: 73

There is much to consider when considering bankruptcy. In order to file for either Chapter 7 or Chapter 13 bankruptcy, you must first obtain credit counseling from an approved source.

When you file for Chapter 7, or liquidation bankruptcy, property that is valued higher than the allowable exemption for that property type usually is sold by the court-appointed trustee. You get to keep some of what you own, such as clothing and other personal effects, some household goods and furnishings, and possibly your home. You might be allowed to keep a vehicle. The trustee likely will sell all collectibles and heirlooms.

Even though you are forced to part with prized possessions, some debts are not erased. You will continue to owe child support payments, whether current or in arrears; alimony payments; some back taxes and most student loans; and the bankruptcy trustee's fees, filing fees and all attorney fees you incur while pursuing either Chapter 7 or Chapter 13 bankruptcy. There are 19 types of debt that cannot be erased or discharged through a Chapter 7 bankruptcy. There are a few types of debts that continue after completion of a Chapter 7 bankruptcy that can be discharged if you instead file under Chapter 13.

Generally, any money you owe that you do not pay becomes, by law, income to you. For example, John Jones owes $25,000 of credit card debt. He files for Chapter 7 bankruptcy. The trustee must pay secured debts first before applying money to unsecured debt. In this example, there are only enough funds gained through sale of non-exempt property to pay $5,000 of the credit card debt. The credit card company, once payment to it is finalized, reports the remaining $20,000 as income to John Jones. This report is sent to the Internal Revenue Service, with a copy to Mr. Jones. John Jones is liable for paying income taxes, both state and federal, on the $20,000 for the year in which it is reported. Mortgage debt that is forgiven, under certain circumstances, may be exempt from this rule.

To qualify for Chapter 7 or Liquidation bankruptcy, you must pass a "means test." If you have a regular source of income and own property, proceedings under Chapter 13, Adjustment of Debts of an individual with regular Income, might be better. Chapter 13 requires that you develop and file a budget that includes a schedule of payments you will make to reduce your debt. If you want to keep your house and other possessions, your budget shows how you will bring those payments up to date within the five-year time frame allowed. Once your plan is approved by the court, you will continue to own any property that you yourself do not sell. Your actual payments go to the bankruptcy trustee, and the trustee distributes the money. When you complete all payments mandated by the bankruptcy payment plan, the court discharges your debts.

Once the bankruptcy court discharges your debts, all debts covered by the bankruptcy filing are eliminated. Usually, more debts are eliminated under Chapter 13 bankruptcy than under Chapter 7 bankruptcy. Discharge of debts is much faster, however, for Chapter 7 bankruptcies, often in as little as three months. Discharge of debt in Chapter 13 bankruptcies may take as long as five years.

If you are considering bankruptcy, you will want to fully educate yourself as to the benefits and disadvantages of each available option. You then will be able to choose the course of action that is best for you.

Christopher Alliotts 60 W Alisal Street, Suite 10 Salinas, CA 93901

Source: EzineArticles
Was this Helpful ?

Rate this Article

Article Tags:

Bankruptcy Filing




Chapter 7


Bankruptcy Attorney

The 3 Month Payday Loans is most suitable options for the people who do not possess assets. There are a variety of loan options for the people who are willing to pledge assets against the cash

By: Cameron white l Finance > Personal Finance l July 09, 2013 lViews: 560

For many people, bankruptcy can make their world fall apart. The apparent loss of reputation coupled with the inability to take financial decisions can deter anyone from thinking clearly. But all is

By: noragwilt l Finance > Bankruptcy Lawyers l November 18, 2012 lViews: 303

If you are availing payday loans with monthly payments, it is easy for you to obtain quick money from online lending companies.By getting the best deals of loan, you can save money in terms of

By: Malen Cheks l Finance > Loans l November 16, 2012 lViews: 288

Loans online have become the popular source of income and people can make smart decision of taking it.Now, don’t go anywhere and sit in your home silently. Such deals would bring you money without

By: Marsh Jone l Finance > Loans l November 13, 2012 lViews: 288

Loans for the unemployed would let you feel comfortable with your unstable conditions due to jobless period.If you compare the rates of a few lenders, you would definitely get the suitable lender to

By: kelse roy l Finance > Loans l November 13, 2012 lViews: 467

By taking cash advance for bad credit, it is easy for you to improve your credit status. This loan is useful to relieve financial stress. This loan is totally free from credit verification and

By: Honard Nork l Finance > Loans l November 09, 2012 lViews: 300

As experienced bankruptcy attorneys, we know that people are forced to file for bankruptcy for many reasons. Though sometimes circumstances are outside of your control (sudden unemployment, high

By: Christopher Ml Finance > Bankruptcyl June 15, 2012 lViews: 218

With the innovations caused by the development of the internet years ago, a lot has changed, specifically in the world of customer service. You can now get product information online, contact

By: Anthony Clinel Finance > Bankruptcyl June 13, 2012 lViews: 182

If your business is struggling and you decide to file bankruptcy there are several options available for your consideration. You don't necessarily need to close your business down. Understanding the

By: David Changl Finance > Bankruptcyl June 12, 2012 lViews: 203

If you are not able to fill the bankruptcy forms on your own, then you should take help from the many financial helpers in the market. However, let me tell you one thing straight. It is a good sign

By: Muhammad Azam Goharl Finance > Bankruptcyl June 12, 2012 lViews: 145

When it comes to bankruptcy, there's a lot of information you need to know. Finding all of this in one source can be difficult and frustrating for many people. You probably have a lot of questions at

By: Christopher Ml Finance > Bankruptcyl June 12, 2012 lViews: 312

According to Dave Ramsey, bankruptcy is in the top five worse things that can happen to you in a life time. It stands near divorce, illness, disability and loss of a loved one. After all bankruptcy

By: Krzysztof Wasilakl Finance > Bankruptcyl June 11, 2012 lViews: 173

Discuss this Article

comments powered by Disqus