When you plan to file for bankruptcy, there are two different types that you can file for. Though the result of both is the same, there are a lot of differences in both.
Filing for chapter 7 bankruptcy gives a permit to an individual to discharge their secured debts. Unsecured debts are mostly considered a consumer and household debts. Credit card debt, medical debt, auto loans, and mortgage debts are some debts that come into this category. Very limited debts are not covered under chapter 7 bankruptcy- Debts like student loans, child support, and certain types of taxes are some non-dischargeable debts not covered. Chapter 7 is also known as liquidation bankruptcy. Chapter 7’s eligibility is determined by a “means test”. Any individual whose income is below their state’s median income can qualify for a chapter 7 bankruptcy. When you file for chapter 7 bankruptcy, an automatic stay gets into effect for all of your creditors. An individual is relieved from the nagging of the creditors for a while. In Chapter 7, debts are re-paid by liquidating the Assets of the debtor.
Chapter 13 bankruptcy is also usually referred to as Wage Earner’s Plan or reorganization bankruptcy. In Chapter 13, all your debts are consolidated and set up into monthly payments that last for 3 to 5 years, or till the life of the bankruptcy. Unlike chapter 7, where the debts are written off, here, an individual has to pay back their debts though at a lower rate. The creditors cannot directly ask for payment from a debtor once chapter 13 is filed. A person, known as the trustee is put in charge to make the monthly repayment plan. Only if you have received counseling from an accredited bankruptcy agency within the last 180 days of filing, can you file for chapter 13 bankruptcy.
Apart from all of this, only an attorney can help you determine whether you should file for chapter 7 or chapter 13. Seeking an attorney at the right time is the best decision to make before filing. You can also contact Recovery Law Group from Los Angeles & Dallas, TX for the Same. Contact – (888-297-6203).