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Personal Bankruptcy- Choosing Ch7 Or Ch13 Bankruptcy
Bankruptcy laws in the US are set by the federal government and administered in the Bankruptcy law courts. The purpose of the laws is to reach an equitable agreement between the person filing for bankruptcy and those that are owed money. The laws try to get as much of the money that is owed to the creditor without making it impossible for the debtor. It is thought that nearly one million people will go bankrupt this year in the United States. They will consider filing for bankruptcy. This article will cover the ways they can go if they decide to file for personal bankruptcy.
Filing under Ch7
Filing chapter 7 personal bankruptcy is the most common form of personal bankruptcy. Essentially it is a court arranged way to liquidate your assets and use this money to service your debts. The process involves drawing up a list of personal assets that a court appointed trustee will sell off. The court will then distribute the money from this process to all the creditors. Chapter 7 bankruptcy costs approximately $300 for a filing fee. It can be filed once every 7 years by the individual.
Filing Chapter 13
Chapter 13 is a little different from chapter 7. The purpose of filing for chapter 13 is to reduce your debt but unlike chapter 7 it does not cancel out the debts. Again, it is administered by a court appointed trustee. The trustee will help you to set up a payment plan. This is agreed by you and your creditors in court. Once the payment plan is in place then you will find the money each month and give it to the trustee. The trustee will then distribute the money as per the agreement in court to various creditors. The aim of chapter 13 is to give the individual a chance to pay off his/her debts without losing all of their assets. However the debts are not cancelled out until they are fully paid. This may take many years depending on the sum of money owed.
Although both these types of personal bankruptcy will eventually clear your debts there are some things to consider before filing for one or the other. Chapter 7 will be a quick way of removing this debt but it will also give you a bad credit history and make it harder to recover from bankruptcy. Some personal assets that may be exempt from liquidation, like your home and car need to meet a specific criteria before they are eligible. You must owe 80% of the mortgage on the home. The car must be valued at less than $2000. In chapter 13, it will take longer to remove the debt but you will not lose any assets. However, the debt you will be paying off has to match the following criteria. You can't have a unsecured debt in excess of two hundred fifty thousand dollars. You can't have a secured debt that is more than seven hundred and fifty thousand dollars.
The bottom line is that you know the rules and regulations of the various chapters well before ever filing for one or the other. It may be an idea to employ a lawyer versed in the bankruptcy laws who can advise you on the best option for your particular case.
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Learn how to recover from bankruptcy quickly and obtaining unsecured credit cards after bankruptcy.
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