How Do I Apply for Chapter 7 or Chapter 13 Bankruptcy?
In most instances, Chapter 7 Bankruptcy is better than Chapter 13 Bankruptcy as the process is quicker and you’ll be able to keep all if not most of your property. It is important to familiarize yourself with how they work so that you’re aware of your options in case you’d like to file for bankruptcy.
Chapter 7 Bankruptcy
It is one of the most effective options to explore if you’d want to quickly get rid of debt. Since it is a liquidation bankruptcy, it will wipe out unsecured debts and any medical bills that you could be having. It is relatively easy to complete as it can take between three to six months. Even though it is possible to lose your property with Chapter 7 bankruptcy, getting a good attorney like Richard Weaver Bankruptcy Attorney will ensure that you’re keeping most of it.
Who Should File For Chapter 7 Bankruptcy?
Chapter 7 bankruptcy will work well for those people:
-Someone who doesn’t own a lot of property
-Family incomes don’t exceed the state’s median
-Have personal loans, medical bills, or credit card balances.
You’ll be required to take the means test in order to determine if you qualify for the Chapter. You’re automatically qualified for Chapter 7 if your income is below the state’s average.
Chapter 13 Bankruptcy
There are circumstances where Chapter 13 could meet your needs. Chapter 13 is purposely meant to reorganize bankruptcy to make it possible for debtors with regular income to make monthly contributions towards offsetting the debt. Even though there are some debtors that qualify for Chapter 7 bankruptcy, they’ll prefer to settle for Chapter 13 because of the availability of more benefits. With Chapter 13, you get to keep your property as long as the creditors are paid what is equal to the amount for the non-exempt. Most people will opt for Chapter 7 because there is no obligation of paying back the creditors.
Chapter 13 is for debtors that:
-That has fallen behind on car and house payments
-Don’t qualify for Chapter 7 but still in need of debt relief
-Have non-dischargeable debts such as child support or alimony.
Which One Should You Apply For?
Most people will prefer to file for Chapter 7 because it is easy and straightforward. You get to keep your property and there is no fear of monthly repayments.
The Disadvantages of Chapter 7 Bankruptcy
Chapter 7 is the most common type of bankruptcy but it still has its downsides. Here are the main ones you should be wary of:
Property that is Not Exempted Can be Sold by the Trustee
Bankruptcy exemptions will provide protection to what is referred to as “basic” property. This could include furniture, clothing, retirement accounts, and cars to a certain amount. The state jurisdiction will also determine what is exempt when filing for bankruptcy. Chapter 7 liquidation might not be the ideal choice if there is a property that you’d want to be exempted from but is not covered.
Might Not Be Useful With Expensive Car Loans
Chapter 7 can help to keep the car but it will not offset the responsibility of paying for the loan. You’ll still be stuck with the same interest rates even signing the reaffirmation agreement. This could seriously impact the ability to repair the loan, especially when there are high-interest rates.
Stays on the Credit Longer Than Chapter 13
Even though it will be possible to begin rebuilding your credit score once that the discharge has been entered, it should be noted that Chapter 7 will stay on your records for up to 10 years. Chapter 13 will be removed after 7 years since the bankruptcy was filed.
You Might Not Qualify if You Make Too Much Money
The means test will determine the disposal income limit that qualifies for Chapter 7 bankruptcy. Even though it might not be that big of a deal as you’ll be qualified for other options, it is crucial that you have an understanding of how the specific Bankruptcy Code could have an impact on your particular situation.
Having looked at the process of applying for Chapter Bankruptcy, there are some common mistakes you’ll need to avoid before filing for bankruptcy and we’re going to highlight some of them.
Avoid transferring assets: This could be consequential when applying for Chapter 7 bankruptcy. Just because you transfer assets to your grandma's name doesn’t mean there will be protection. You could be accused of committing bankruptcy fraud knowing too well about the impending filing. You could still be prosecuted even if the transfer was done unknowingly.
Don’t make credit card purchases: It is recommended that you’re not using your credit at all unless it is for purchasing basic necessities. There is the risk of creditors objecting to the discharge of debt when you buy a luxury item prior to filing for bankruptcy.
Don’t file for bankruptcy if you’ll receive future payments: Future payments could go into the bankruptcy estate. The money can be used to pay unsecured creditors when you file for Chapter 7 bankruptcy.
Filing under the wrong bankruptcy chapter: This could happen when you decide to file for bankruptcy on your own. A lot of debtors will opt for either Chapter 7 or Chapter 13 bankruptcy. Each of the options will have advantages and disadvantages. The type of bankruptcy that you decide on will depend on the individual financial circumstances.
Make sure to attend the meeting of creditors if the filing of the bankruptcy is to be taken seriously. In addition to that, you’ll want to hire an experienced bankruptcy attorney. They will help in achieving the best possible outcome for your particular situation. Make sure to consult with an attorney before filing. Sometimes bankruptcy isn’t the solution and a good attorney will make you aware of the options. Such an attorney will provide a free consultation that you can take advantage of so as to be aware of the course of action.
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