Chapter 7 Or Chapter13: Which Would Be A Preferable Option?

Are you keen to deal legally with the creditors in order to discharge your debts

? Then filing bankruptcy would be a good option. While you file bankruptcy you might be able to get the repayment plan to pay off the debt along with the discharge of debts. The creditors would not be able to collect debts while you discharge your entire debts under bankruptcy. The most common way to file bankruptcy is through filing under chapter 7 and 13 bankruptcy. But many people are not aware that there is a difference between chapter7 and chapter13. This article can throw light on these two different personal bankruptcy procedures that would help to take right decision while choosing to file bankruptcy.

Chapter 7 Bankruptcy:

Chapter 7 bankruptcy is also considered to be a 'liquidation' bankruptcy. The debtor has to surrender all his non exempt property to the trustee. He evaluates the debtor's non exempt property. Then the trustee uses the assets for sale and fund raised from the sale is distributed among the creditors. If a debtor files under chapter 7 there are few terms that would help him to retain his car, house as well as the retirement account.

Filing under chapter 7 bankruptcy helps to eliminate the unsecured debt. The creditor has to stop the collection process with the implementation of the automatic stay order. On failing to provide authentic financial information the debtor's petition would be dismissed.

The debtor in order to qualify under chapter 7 bankruptcy has to under go a 'means test'. The pre-filing requirement states that the debtor needs to have a session with a credit counselor and then file for Chapter 7 bankruptcy protection.

Chapter 13 Bankruptcy:

If the debtor is planning to pay off your debts then he has to file under chapter 13 bankruptcy. But filing under chapter 13 would be different from filing under chapter 7 as the debtor needs to have stable income in order to pay off the debt.

Before filing under chapter 13 bankruptcy the debtor has to undergo a credit counseling briefing. The petition might be dismissed if the lawyers of the debtor do not produce the certificate of the credit counseling briefing. If the case is dismissed then the creditor would resume with the collection practice.

The repayment plan under chapter 13 bankruptcy is assessed by the trustee and approved by him. The debtor has to pay off the debt with 5 years of time span. During this time the creditors are not allowed to contact the debtor. A monthly payment would be made to the bankruptcy trustee who would disburse the cash among the creditors.

Therefore, these are the basic difference between chapter7 and 13 but you need to understand your financial situation and then take decision accordingly. If you are facing financial hardships and face difficulty to pay off the debt then filing under chapter 7 bankruptcy would be appropriate for your situation. And chapter 13 would be suitable for them who have the capability to payoff the debt and has a steady income.

by: Wilson Jeff

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