Most people have heard of Chapter 7 bankruptcy, but there is also Chapter 13 bankruptcy. This article talks about some of the differences between the two and how they might affect someone who has to file.
There are many differences between Chapter 7 and Chapter 13, but the main difference between the two is that Chapter 13 often lets a debtor (the person filing for bankruptcy) keep certain assets that would be lost under Chapter 7 rules. Under either plan, you can usually keep your home and car as long as your equity doesn't go over certain limits. But you wouldn't be able to keep rental properties, antique collections, and other similar things if you filed under Chapter 7. You could keep these things if you filed under Chapter 13.
People who have too much income to file for Chapter 7 bankruptcy usually file for Chapter 13. This also includes people who have a lot of property that can't be given away.
Chapter 13 bankruptcy is for people or small business owners who want to pay back their debts but can't because they are having trouble making ends meet. Chapter 13 usually protects people from their creditors' attempts to get their money back and lets them keep their real estate and personal property. It also gives the person a way to pay off their debts with smaller payments.
A trustee works for both sides and usually comes up with a payment plan that can pay off all or part of the debts over the course of three to five years. The trustee will also figure out how much the debtor can pay each month. This is the amount over and above what is needed to live. For this to work, debtors must have a steady income and at least some money they can spend. The debts are paid back with the money that is left over after bills are paid.
The person who files for Chapter 13 must have a steady income and some cash on hand. This is a big problem. For a lot of people, they just don't have it. They might not have gone bankrupt in the first place if they had it. The second problem is that someone who files for Chapter 13 will have to pay back more of their debt than someone who files for Chapter 7.
Chapter 13 will show up on your credit report, but it usually stays there for less time than Chapter 7.
Filing for bankruptcy is a big step, and you shouldn't do it until you've tried everything else. People used to think that going bankrupt wasn't really that big of a deal. A lot of that has changed since then, and it can make a big difference in your ability to get credit or loans in the future.
The laws about bankruptcy have changed recently, so anyone who is thinking about filing should first talk to a good bankruptcy lawyer. These specialised lawyers will be able to point you in the right direction for the best choice for your needs.
When hiring a qualified bankruptcy lawyer, be sure to ask for examples of past cases they have worked on and make sure you know how much they will charge before you move forward.
