What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
The majority of bankruptcy cases that are filed in the United States generally fall within the realm of Chapter 7 or Chapter 13 Bankruptcy. Whether you need a Chapter 7 or Chapter 13 Bankruptcy case depends on several factors like your debts, assets, income and financial goals for the future. Let’s take a quick look about both Chapter 7 and Chapter 13 bankruptcy to help you decide which is right for you.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is a liquidation bankruptcy that is designed specifically to knock our unsecured debts like credit card and medical bills. In order to qualify for Chapter 7 bankruptcy in the United States, you must literally have no disposable income. If you’re income is too high you will be forced to file for Chapter 13 bankruptcy, which we’ll talk about later.
Once you’ve filed for Chapter 7 bankruptcy, a state appointed trustee will be assigned to administer your case. It’s the Chapter 7 trustee’s job to review your paperwork and supporting documents and to sell your non-exempt property in order to pay back your creditors as much as possible. However, if you don’t currently have any nonexempt assets, your creditors won’t receive any payment. This is why Chapter 7 bankruptcy is usually reserved for those suffering of low income debt with little or no assets who desire to rid themselves of unsecured debt.
Chapter 13 Bankruptcy
On the other hand, Chapter 13 Bankruptcy is designed to help debtors reorganize. If you’re able to pay back at least a portion of the debts that you owe, Chapter 13 Bankruptcy is probably right for you. This is also the case as far as your income goes, if you make too much income to file for Chapter 7 Bankruptcy, you’ll have no choice but to file a Chapter 13 case. However, lots of debtors because if offers a lot of benefits that Chapter 7 Bankruptcy does not.
In addition, if you plan on filing for Chapter 13 Bankruptcy, you’ll get the opportunity to catch up on your missed mortgage payments. This way you’ll get to keep all of your property, including nonexempt assets. But, in return, you’ll have to pay a portion of your debt with the assistance of a payment plan that’s built around your income, expenses and other types of debt. Generally, we suggest Chapter 13 Bankruptcy to debtors who can still afford to make monthly. If you’re unable to pay off any non-dischargeable debts like alimony or child support, Chapter 13 Bankruptcy is right for you.
If you or one of your loved ones are currently considering filing for Chapter 7 bankruptcy and are looking for representation, don’t hesitate. Call the offices of KE Law in order to get yourself back on your feet as soon as possible. Contact us at 323.426.8300.