What type of bankruptcy should I file?


You should understand the pros and cons of each chapter based on your financial situation, your goals, and your objectives as https://bankruptcyhq.com/ notes.

There are several decisions involved in filing for bankruptcy. This is usually a decision that the potential registrant cannot make. In certain situations, however, someone who otherwise qualifies to Chapter 7 could opt for Chapter 13 cases.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most commonly used type. These legal proceedings are very fast and end in the repayment of an individual’s non-priority, unsecured debt. Chapter 7 can only be granted to debtors who have the financial resources necessary. Chapter 7 cases are not available to everyone because they are designed for those who have limited income and/or resources.

Potential Chapter 7 registrants must overcome two obstacles. The first is called the “resources test”. This calculation calculates your current monthly earnings. Chapter 7 may be filed if you have a lower income than the median for your region. It doesn’t matter if it is lower than the median income. In order to determine eligibility, you will need to deduct a variety of expenses and deductions from your household income. These include employment taxes, payments for secured creditors, food, and shelter allowances.

The amount of non-exempt assets a debtor holds is another hurdle. Chapter 7 is also known as “liquidation”, because you may need to turn over your assets and property to a trustee appointed by the court. The trustee will then sell your property and distribute the proceeds to creditors. There are many exemptions available that will protect your property. You will either use the state exemptions or the Federal exemptions, depending on the jurisdiction in which you file. These protections allow property owners to keep their property. Non-exempt assets must be sold. It may be beneficial to file Chapter 13 if you are in this situation.

Chapter 13 Bankruptcy

If a couple files a Chapter 13 petition, they seek to reorganize financial obligations. Chapter 13 allows you the possibility to repay a portion of your debts while simultaneously paying off other ones.

The bankruptcy plan is the main element in a Chapter 13 proceeding. The plan will be proposed by the debtor and will cover three to five-years. It will also reflect its intentions with respect to its creditors. Chapter 13 plans, for example, might stipulate that the debtor will pay past due federal taxes and its mortgage arrears. A pro-rated amount will be paid to its unsecured creditor. While this is not an agreement with creditors, the plan must conform to the Bankruptcy Code. If the code is not followed or the claim processed properly, a creditor can object to this plan.

Factors that help determine which bankruptcy chapter will be the most profitable

As stated above, bankruptcy filings are not always easy to decide on which chapter to file. Chapter 7 may be the best choice in most cases, since it is faster and doesn’t require that you pay your creditors. There are many other factors that can affect a registrant’s decision.

Types Debt

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There are many types of debt. Chapter 7 might be an option for you if your principal unpaid debts are medical bills and unsecured credit cards. In as little as five years, a qualified filer could get rid of all of their debts. However, there are many other financial obligations.

Mortgage foreclosures are quite common. If a homeowner falls behind on their payments, a lender can foreclose the property. If a Chapter 13 filing is filed, the homeowner will be allowed to repay any money he has lost in excess of five years. Chapter 13 could be the best option to save your home if your mortgage payments have been neglected due to job loss, temporary financial difficulties, or other circumstances. Chapter 7 cases are not able to catch up on secured payments.

Non exempt equity in property

You might be able to keep non-exempt property as mentioned above. One example is $ 15,000 worth of equity in your home, and $ 60,000. You probably won’t want your house to be sold to pay off some of the debt. You can choose to file Chapter 13 and repay your creditors $ 15,000 every five years. Based on current facts, $ 35,000 worth of debt would be discharged. Many times, debtors pay less than what they would have if they attempted direct negotiations with their creditors.

Additional considerations

There are specific considerations that must be taken into account when choosing the bankruptcy chapter. Chapter 13 offers the possibility to eliminate a second loan. This option is not available in Chapter 7. A Chapter 13 debtor can reclassify a secondary mortgage as unsecured debt to meet its financial obligation. It is important that you note this is rare. The house must have a lesser value than the first mortgage.

Chapter 13 provides another benefit, namely the ability “reduce” car payments. The ability to “reduce” car payments may apply if the car was purchased 910 calendar days before filing. If the vehicle’s worth is less than what is owed to you, a Chapter 13 debtor could offer to pay your car’s fair-market value through bankruptcy.

Filing bankruptcy should be considered

Do not file for bankruptcy unless you weigh the pros and disadvantages. A bankruptcy filing should be considered in conjunction with your financial goals and situation. People filing bankruptcy won’t have any choice about the type of file they choose – their financial situation will dictate which file they choose. Some cases may be more appropriate than others. Consult a lawyer specializing in bankruptcy cases in your state.

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