Navigating the sea of bankruptcy forms can be overwhelming. And, to make matters worse, as you’re deciding which type of bankruptcy to file, you’ll find that there are several differences.
Chapter 7 bankruptcy is typically designed for the family that needs total debt relief. Assets may be sold to pay off some debts, but the rest winds up being forgiven. Chapter 7 bankruptcy is for families that cannot, within reason, pay all the debts that they have accumulated.
Chapter 13 bankruptcy is the bankruptcy that works best for families who will eventually be able to pay their bills but not in the time that their debtors expect. A chapter 13 bankruptcy is really a reorganization of your assets and liabilities so that the majority of them can be repaid, on a budget that you can manage.
Chapter 7 Basics
- Chapter 7 differs from Chapter 13 in many ways. You’ll need to read the differences carefully before you make your decision on which to file. Here are some things that are important about Chapter 7:
- You must have a monthly income that’s less than the median wage in your state.
- Most of your debts will be forgiven
- You may lose assets that are secured. For example, if you have a car loan, your car may be repossessed.
- Non exempt assets will be sold to pay your creditors.
- You may be able to keep your home if you’re up to date on the mortgage.
- Chapter 7 remains on your credit report for 10 years.
Chapter 11 Basics
- Chapter 11 is for people who have lots of debt, but still have reasonable income.
- Chapter 11 filers are put on a payment plan for their debts.
- If payment plan is completed, your non-exempt assets are not sold.
- Vehicle is preserved if payment plan is met.
- You typically have three years to complete the payment plan; sometimes five years.
- Typically, you will pay only a portion of your debts. If you stick to the arranged payment plan, at the end of the period, the rest of your debts are forgiven.
- Chapter 11 remains on your credit history for at least 7 years, sometimes 10.
Get Legal Help
Trying to navigate through the details of filing bankruptcy alone is not a good idea. Using a qualified bankruptcy attorney will not only make things easier for you, but will also ensure that bankruptcy forms are filled out correctly and that as many of your assets as possible are protected.
