There are predominantly 2 types of bankruptcy for consumer debt. A Chapter 13 and a Chapter 7. Both types of bankruptcy have their own advantages and disadvantages. In this brief article, we will go over some of the basic information you need to make an informed decision. Both chapters may allow you to eliminate high interest credit card debt, eliminate or settle collections and may even be favorable in cases of foreclosure.
Chapter 13 Bankruptcy is repayment plan of debt that needs to be approved by the court in order to payback creditors. This is also known as consumer reorganization or debt adjustment and is monitored by a trustee provided by the court to ensure applicants follow every stipulation agreed upon.
There's a period of three to five years for debtors to pay their creditors, provided that an outline plan has already been approved by the courts and the creditors. This plan shall contain all the transactions which will be entered upon repayment of these creditors and will usually start within a month or 45 days after the procedure.
In Chapter 13 Bankruptcy, debtors should prove their ability to comply with the prerequisites through their earnings. The total unsecured debts should not be higher than $336,900.00 and the total secured debts would only be $1,010,650.00 as stated by the Bankruptcy Code.
While laws changed for bankruptcy in 2005 making Chapter 7 harder to file, Chapter 13 bankruptcy can still an attractive option among financially troubled debtors who wish to pay back their debt.
Debtors filing under Chapter 13 bankruptcy have the privilege of keeping some or all parts of their properties, which mean they will be paying their debts from the income generated by the business. This petition also prevents foreclosure of real properties including their homes. This type also encompasses super discharge for debts by means of fraud not offered in Chapter 7 bankruptcy. Collateral is important since these are prioritized over other properties which are subjected to reform.
Chapter 7 bankruptcy allows debtors to discharge consumer debts giving those in debt a fresh start. Chapter 7 bankruptcy is nice because someone in debt can get rid of almost all of their consumer debt. Many lenders will even lend to you right away after you file for bankruptcy. Government rules make it harder to file for chapter 7 in order to protect the banks.
While there are many factors that determine whether you file chapter 7 or 13, it is still recommended to speak with a qualified attorney before taking legal action. To learn the definition of bankruptcy(http://bankruptcy.findlaw.com/what-is-bankruptcy/bankruptcy-definition-what-exactly-is-it.html may also be of interest)