IF you’ve made the decision to file bankruptcy in order to get a fresh financial start, which type of bankruptcy is right for your situation: Chapter 7 or Chapter 13? Here are some things to consider in choosing between the two.
Be aware, however, that your income and expenses have a lot to do with which chapter you will be able to file because the courts do consider your ability to pay when you’re applying for debt relief.
In other words, sometimes even though you want to file for Chapter 7, your income may be too much to qualify. For starters, below are some of the basic things you need to know.
Under Chapter 7, you receive a fresh start by having most debts wiped out (“discharged”). This includes most unsecured debt except student loans, alimony, child support, most taxes and debts incurred by fraud.
If you have non-exempt assets, you may possibly have to sell them in order to pay creditors. However, most filers do not. For example, almost 100 percent of my clients keep everything and lose nothing at all by filing Chapter 7.
Under Chapter 13, you must still pay off all or some of your debts over a three to five-year period. Priority debts must be paid in full while unsecured debts are paid either a percentage or in full, depending on how much you can afford.
The discharge of debt under Chapter 7 usually occurs within five months, as opposed to the three to five-year repayment plan under Chapter 13. Chapter 7 stays on your credit report for 10 years while Chapter 13 stays on it for seven years — both from the date of filing.
Most people are able to rebuild their credit, however, much sooner than seven to 10 years from their bankruptcy case filing date by timely paying debts that are reported to the major credit bureaus.
There is no limit on the amount of debt you may have if you are filing Chapter 7. However, Chapter 13 does have limits on both secured and unsecured debts.
The important thing to remember is that not because you want to file Chapter 7 necessarily means that you can do so. Not everyone is eligible. If the court thinks that your income is sufficient to fund a Chapter 13 repayment plan, then your Chapter 7 petition will be denied.
Under current law, you can only file a Chapter 7 once every eight years so if you’ve had a recent bankruptcy and you find yourself in debt again, you may not have a choice but to file a Chapter 13. Your bankruptcy attorney can review all relevant dates and advise you what is possible and best for your situation.
If you need help in getting your finances back on track, call my office at 866-477-7772 to schedule a free confidential consultation. Since 1998, I have represented more than 5,000 clients in bankruptcy. Let me help you get out of debt once and for all. I have offices in Glendale, Cerritos and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped thousands of clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1 (866) 477-7772.