The new bankruptcy code of 2005 changed the landscape of filing bankruptcy in that it made filing Chapter 7 more difficult and Chapter 13 more common. The rates are still of Chapter 7 being more common. However, some mistake what Chapter 7 really is. Others miss the main benefits of Chapter 13. This guide demystifies the laws for filers.
What Chapter 7 Really Is
Chapter 7 bankruptcy is a liquidation. Here you are technically discharging the majority of your debt, but, your assets can be liquidated. If you have a lot of assets, you stand to lose some of them, especially those worth a lot of money. It's the bankruptcy trustee's job to sell your assets to pay your creditors. Some mistake what this form really is. You are not discharging debt at no cost; if you have assets, you can lose them. Also, you have no protection from a foreclosure, though it does buy you time to stay in your home.
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The Big Benefits of Chapter 13
While you have to pay some if not all your debt with this form, you can be fully discharged, can protect your assets, and stop a foreclosure from occurring. Yes, you are paying on the debts, but you stand to keep everything if you have some form of income. If you have a valuable home and car, filing Chapter 7 may mean losing these assets. This does not occur in Chapter 13.
Choosing One Form
In some cases the choice between filing these forms of bankruptcy is made for you. Why? The new bankruptcy code, as discussed earlier, changed the laws. If you make too much money, the state median income for a family your size, you will have to file Chapter 13 anyways. If you have a high paying job, say over $50,000, that is over most state median income levels, and you can't file Chapter 7. If you have a minimum wage job, few properties and assets, and a lot of credit and medical debt, Chapter 7 may be better. But if you own a lot, Chapter 13 has some big benefits.
Who can help?
This does get technical and you should consult with a lawyer. The important point to remember is that you have choices when you decide to file bankruptcy. You can sometimes choose which form is best for you, and always choose who will be helping you. A professional bankruptcy lawyer can save you valuable time and money in utilizing the legal resources available. You may have a huge medical debt; Chapter 7 can discharge it. You may fear foreclosure; Chapter 13 can protect it. Both are supposed to help people, just like a good lawyer.
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