A Bankruptcy Attorney Can Help You Decide

A bankruptcy attorney can help you determine whether Chapter 7 or Chapter 13 is best for your situation

. Bankruptcy allows you to repay a percentage of your debt back to your creditors. Through negotiation and compromise, both you and your creditor work together to reach an amount which can reasonably be paid either through liquidation of your assets or through a redesigned 3- to 5-year payment plan.

Chapter 7

Chapter 7 often allows debtors to be exempt of all their debt. It's often called "fresh-start" bankruptcy because it allows you to begin again with a clean slate that's completely free of debt. Some items that are not forgiven by Chapter 7 are student loans, tax debt, child support or alimony payments, government fines, and debts assigned by a divorce decree. A Chapter 7 bankruptcy attorney can help you determine how much of your debt would be eliminated by this process.

In order to repay as much of your debt as possible, your lawyer will help you liquidate as much of our assets as possible. Typically, you are able to keep your clothing, household goods, and other personal items. You may even be able to keep your home and car, if you're up-to-date on your payments.

Chapter 7 is ideal for those dealing with an insurmountable amount of unsecured debt. Unsecured debt includes items such as credit cards, medical bills, and other unsecured loans. These loans are typically forgiven within 4-6 months. You'll enjoy freedom from creditor phone calls, and you can begin using your money for everyday expenses as well as saving for the future.

Since Chapter 7 remains on your record for at least 10 years, you may have trouble obtaining a loan or qualifying for major credit cards. However, many individuals have found it relatively easy to qualify for these items within a couple years of filing.

Chapter 13

With Chapter 13, your debt will be consolidated in order to be repaid in 3 to 5 years. Instead of paying your creditors directly, you'll be paying a lump sum to the court, which will then be divided among your creditors. A Chapter 13 bankruptcy attorney can help you determine if this decision is right for you.

One of the primary requirements for Chapter 13 is a regular monthly income that will allow you to continue making payments to your creditors. For this reason, Chapter 13 is often known as the "wage-earner" bankruptcy.

Some of the most common reasons for choosing Chapter 13 include:

- Home Foreclosure - Chapter 13 prevents your lender from continuing the foreclosure process and forces them to negotiate with your lawyer for a new 3- to 5-year payment plan.

- Debt Consolidation - Under Chapter 13, you'll be allowed to consolidate debts such as student loans, tax debts, child support debts, and other loans. The court will work to establish a new 3- to 5-year payment plan, which allows you to continue paying your debts without calls from creditors.

If you're facing an overwhelming financial situation, contact a bankruptcy attorney to explore your options through Chapter 7 and Chapter 13.

by: Abraham Avotina

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