Choosing to take control of your finances may require a bold step. Depending on your situation, the only way to firm financial footing may involve filing bankruptcy. While this process was once looked down upon, these days, the stigma has lifted somewhat. The entire process is less overwhelming and may offer you and your family the only viable way to get out of debt. Whether your situation was caused by medical bills, poor investments or over-dependence on credit cards, Chapter 7 or 13 bankruptcy can help. Discover three differences between the two types of filing routes.
- Chapter 7 Demands Some Asset Forfeiture
When a person files under Chapter 7, it is with the understanding that they will lose some of their assets. The court appoints a trustee, someone who will go over the debts and assets. Once this is complete, the trustee makes recommendations on liquidating some more valuable items. In some states, a primary residence and a car may be saved from liquidation, so finding a bankruptcy attorney in your area can help you know what to expect. Items that are considered secured debts, or those with collateral, like boats, may be returned to the creditor to help clear the debt. Once debts get paid, and not all will, the remaining creditors are discharged.
- Chapter 13 Is a Payment Plan
If you file for Chapter 13 bankruptcy, the trustee will go through your debts and take a look at your income. Creditors get placed in line, starting with the most important. You can opt not to have some obligations included in a Chapter 13 filing, especially if you have been current on those payments. Examples include homes and vehicles. The trustee then works with creditors to arrive at a sum that is not only acceptable but that you can afford to pay over time. A payment plan is created for a period of three to five years. The length is dependent on your income and where you fall under state bankruptcy guidelines. If you make every payment timely, the remaining debt will be discharged after the plan is complete.
- Chapter 7 Stays on Your Credit Longer
Since Chapter 13 contemplates making some payments for over time, it may fall off your credit faster than a Chapter 7 discharge. It is more likely in a Chapter 13 situation that you will reduce more debt. Since qualifying to file under Chapter 13 is conditioned on various factors typically set by state law. Chapter 7 usually stays on your credit for 10 years, while a Chapter 13 bankruptcy may fall off in seven.
Finding a bankruptcy lawyer, like a bankruptcy law firm in Oklahoma City, OK, in your area can help you navigate the tricky waters of bankruptcy and achieve financial peace sooner.
Thank you to the experts at MartinWren, P.C. for their input into bankruptcy law.