After you have decided that bankruptcy is the best solution for your financial situation, consider deciding on the type of bankruptcy beneficial for you by discussing the case with a Hagerstown bankruptcy attorney. If you were an individual or a small business owner, the most common choices would be –
- Chapter 7 – liquidation, and
- Chapter 13 – wage earners or reorganization bankruptcy
You may come across a few other bankruptcies made available under specific circumstances.
Differentiating between Chapter 7 and Chapter 13 bankruptcy process
Let us delve into them to provide you some information to help decide which would be most suited for you in your financial situation out of the two.
- Basics
A Chapter 7 bankruptcy case would discharge several kinds of unsecured debt. The trustee would look forward to selling any considerable nonexempt property for repaying your creditors.
In Chapter 13 bankruptcy cases, you would repay the creditors in full or in part through a specifically designed repayment plan.
- Time frame
A Chapter 7 bankruptcy case would take three to four months to complete.
The Chapter 13 bankruptcy case would last three to five years depending on your income. Eventually, a majority of your unsecured debt balances would be discharged.
- Property
Most Chapter 7 debtors would keep all or a majority of their property. Law would not exempt people with considerable assets or equity. However, they could lose them to satisfy a few debts.
You cannot liquidate a property under Chapter 13 bankruptcy.
- Income
Most high-income earners would not be eligible for Chapter 7 bankruptcy.
Chapter 13 bankruptcy required a regular income for a monthly payment.
- Homeowners or Foreclosures
You could stop foreclosure temporarily under Chapter 7 bankruptcy. However, unless you could receive a current on your mortgage, the foreclosure would continue eventually.
Chapter 13 bankruptcy could stop a foreclosure and you could make up previous mortgage payments through your repayment plan.
- Eligibility
Chapter 7 is suitable for individuals having income less than the median of their state.
Chapter 13 does not entail any income requirement.
- Filing complications
The complications involved when filing for Chapter 7 bankruptcy would be preparing a large set of forms and going through tricky legal issues. However, most simple cases could be done without hiring a bankruptcy attorney.
Chapter 13 bankruptcy entails submission of repayment plan to the court. You would need the assistance of an attorney for its successful completion.
