Most of the bankruptcies filed in United States are either under Chapter 7 and Chapter 13. These two options differ in the requirements and the relief that they provide. You may choose to file under Chapter 7 or Chapter 13 depending on your income, assets, debts, and your financial goals.
Chapter 7 is a form of liquidation, meaning a debtor’s assets may be sold and distributed to creditors. Under Chapter 7 bankruptcy, the debtor seeks to discharge or eliminate, all his dischargeable debts which includes credit card, medical bills and other unsecured loans. In Chapter 7, the debtor usually keep his Homestead and his automobile provided he makes the full monthly payment or he decides to surrender the item’s in full satisfaction of the debt. However, depending on your income you may not be eligible to file under Chapter 7. To qualify for Chapter 7 bankruptcy, you must have little or no disposable income.
When you file Chapter 7, your assets may be subject to sale or liquidation by the Bankruptcy Trustee. One of the Trustee’s primary duties is to seek the sale of nonexempt property to pay back a meaningful distribution to your creditors. Usually, Chapter 7 is for lower income debtors with little or no assets, who wish to discharge or eliminate their unsecured debts. However, about 95 percent of cases filed under Chapter 7 include debtors with no assets above the legal threshold set by state law, therefore, debtors do not relinquish any property.
Any individual and business entities can file under Chapter 7. You cannot file for Chapter 7 if your current monthly income over the six months prior to your filing date is more than the median income for a household of your size in Florida, as determined by the “Means Test” and your disposable income exceeds the limits set by law.
Typically, it takes three to five months to receive a discharge under Chapter 7 Bankruptcy. About 96 percent of debtors who file under Chapter 7 receive a discharge of their debts In Chapter 13, usually takes three to five years for completion of all plan payments. In cases filed between 2008 and 2010, about 41 percent of debtors who filed under chapter 13 received a discharged of their debts. Another 10 percent first filed under Chapter 13, but then converted to Chapter 7 and received a discharge through the Chapter 7 Bankruptcy.
When a debt is discharged, it means that is no longer legally owed. Most unsecured debts including credit cards and medical bills are usually dischargeable with some important exceptions like student loans. However, student loans may be dischargeable in certain situations upon showing of undue hardship.
Other consideration, you cannot receive another Chapter 7 discharge if you have received a Chapter 7 bankruptcy discharge within eight years of filing your prior Chapter 7, or a Chapter 13 discharge within the last six years. However, there are exceptions to the 6 year rule.
Chapter 13 is a reorganization bankruptcy designed for debtors with regular income to pay back at least a portion of their debts through a repayment plan. Under Chapter 13, the debtor keeps all his property including nonexempt assets. The amount you must pay back depends on your income, expenses and types of debt.
Chapter 13 is a form of repayment plan which often involves paying a portion of unsecured debts. The debtor’s obligations are combined in one, regular payment. However, there are certain obligations like utility bills which might be paid outside the payment plan adjusted to the debtor’s income. Under Chapter 13, usually the debtor keeps the house and the car if he continues to pay his obligations over a period of thirty (36) to sixty (60) months. Individuals only are eligible, a corporation may not file Chapter 13. However, there are some situations wherein a small business, in the operation of a sole proprietorship can file Chapter 13 Bankruptcy.
In Chapter 13 bankruptcy, debtors cure on missed mortgage or car payments or pay off nondischargeable debts such as alimony or child support arrears.
Also, for Chapter 13 bankruptcy, creditor cannot reach your co-debtor for the duration your bankruptcy. There are exceptions in cases in which the creditor seeks relief from or lifts, the co-debtor stay. It may be advisable to pay 100 percent on certain debts that carry a co-debtor or co-signer.
Help and Assistance in Bankruptcy and other debt related issues are available here at Weller Legal Group. The Bankruptcy Attorneys, Lawyers, and Paralegals are dedicated to helping you in these difficult financial times. Help and Assistance is here. At Weller Legal Group, if you are in debt, we can help.
