Bankruptcy is a common occurrence with many people in America turning to it to save themselves from overwhelming debts. Despite unique financial situations, many individuals, couples or even businesses are looking for options to file for bankruptcy. However, since situations are different for each of them, they need to choose the best-suited Chapter of the U.S. Bankruptcy Code under which they can file for bankruptcy.
Sacramento based law firm Recovery Law Group has lawyers which offer personalized service to every client who has come with bankruptcy concerns. Since every case is different in nature, the approach towards each case is also unique. It is important to understand the client’s financial situation as well as their requirements and financial goals to device options which will be most beneficial for them.
For individual consumers, when it comes to filing for bankruptcy, there are 2 chapters under which you can file – Chapter 7 bankruptcy (Liquidation Bankruptcy) or Chapter 13 bankruptcy (Reorganisation Bankruptcy or wage earner’s plan). However, it is important to determine which chapter will suit you the most.
Which Chapter Do You Qualify for?
Chapter 7 bankruptcy laws have limits which allow only certain consumers to file under it; while Chapter 13 requires certain factors from the debtors, making the statement that you have a choice of choosing between the two chapters an assumption, which is not always true. This is so because it is not always necessary that you qualify the criteria required to file under a particular chapter. The understanding of this matter is very important as you simply cannot choose one of the two chapters and work for the process.
Chapter 7
For bankruptcy filers with most demanding debt concerns, this chapter comes in handy. This is most appropriate for those debtors who have little to no assets in hand as well as no financial means to continue making monthly payments for any pre-existing debts. To qualify for Chapter 7, the filers need to pass a means test which compares their monthly income to the median monthly income in Texas State. In general, if your average monthly income is less than or equal to the state’s median income, you become eligible for Chapter 7. In case, your income is more than the state’s median, you need to find out if you have enough disposable income to make payments. In case, your disposable income is high, you will not be eligible for filing under Chapter 7.
Chapter 13
This chapter is also known as wage earner’s plan and helps reorganize debts and allows filers to make merged monthly payments towards them over a period of 3-5 years. For this, the filers need to have enough available funds and income to make payments over their reorganization plan. In Chapter 13 bankruptcy, discharge is not granted initially but does take place after the end of the plan. This plan also enables filers to keep certain assets like property by paying back all or some part of the property with pre-existing debt.
No matter which Chapter of bankruptcy you are eligible and file under, it is important to keep your personal goals for a better financial future in mind. Trust bankruptcy lawyers to explain all the unique benefits associated with each Chapter and ultimately choose one which works best for improving your financial goals.