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Why It Is Important To Understand Differences Between Bankruptcy Chapters?

Posted By Allmand Law Firm, PLLC || 27-Jun-2013

Understanding differences between bankruptcy chapters can make a big difference in helping you obtain a favorable outcome for your situation. Most bankruptcies filed by individuals and small businesses include Chapter 7 and Chapter 13. When it comes to understanding which chapter you should file, your debt, income, assets, and financial goals will have a significant influence on which option is the best solution.

Chapter 7 bankruptcy is designed to eliminate or wipe out debt obligations for a fresh start. Unsecured debts such as medical bills, personal loans, and credit card bills may qualify for discharge by the court. Usually, debtors have little or no assets while meeting income requirements. This option can also be used to sell nonexempt property to satisfy creditors.

Chapter 13 bankruptcy is a repayment schedule approved by the court. You make monthly payments to your appointed trustee who then distributes payment to your creditors. This is a common option for debtors who are in default with their mortgage or vehicle loan payments. You can get caught up on missed mortgage payments or qualify for a reduced principal balance on your vehicle. The repayment schedule may last from 3 to 5 years with qualifying debt being discharged at the end of plan.

There are benefits of filing with either plan, but discussing your options with a bankruptcy expert in Dallas-Fort Worth will help you determine if they fit your situation. Both chapters offer property protection from creditors to give you more time in developing the right solution for a favorable outcome.

Reference: http://www.nolo.com/legal-encyclopedia/what-is-the-difference-between-chapter-7-chapter-13-bankrutpcy.html
Categories: Bankruptcy
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