Whether you should file for Chapter 7 bankruptcy or Chapter 13 depends on your level of assets or income. The major distinction is this: Chapter 7 bankruptcy is for people who have fewer assets. It does not require that you repay your debt through a plan that is court imposed. People with higher incomes will be required to file Chapter 13 and will need to make payments to their creditors as they are ordered to by the Court. Here are the primary differences between Chapter 7 and Chapter 13 Bankruptcy:
Chapter 7A Chapter 7 bankruptcy is available to individuals as well as corporations and/or partnerships. In a Chapter 7, the Court appoints a trustee who is responsible for selling all nonexempt assets owned by the debtor in order to pay the debts owed as directed in the Bankruptcy Code. Certain property owned by the debtor will be considered exempt, such as a house, automobile, furniture, clothing, appliances, and tools used for work. All other property will be liquidated by the trustee to pay the debtor’s creditors. This is why a Chapter 7 bankruptcy is also known as a liquidation or a straight bankruptcy.
A Chapter 13 bankruptcy is required when the household income exceeds the median income of the state. The Court will impose a repayment plan that was agreed to by both the creditors and the debtor. The Court will appoint a trustee to oversee the process. This plan will allow the debtor to repay all or some of their debt over a five year period.
A Chapter 7 bankruptcy can be reported on a person’s credit report for up to 10 years, and a Chapter 13 bankruptcy for 7 years.
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.