When it comes to filing for bankruptcy for individuals, the choice is often between Chapter 7 and 13. They are titled chapters since each one outlines the purpose as well as terms and conditions under which one can file for bankruptcy under it.
A general opinion on bankruptcy summarizes what Chapter 7 is all about. A trustee or a caretaker is appointed to overlook all your assets. Some of it will have to be handed over to the trustee. He in turn will sell this off to repay part of your debt. The laws for bankruptcy vary from state to state and this will determine how much equity in your property you will be allowed to retain. Also in this chapter, with all this done, your debt stands to be cancelled.
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If you want to file for bankruptcy under Chapter 7, you should be eligible under the income restrictions that it stipulates. Also if you have already applied for Chapter 7 bankruptcy and been rejected in the past six months, then you will not be allowed to file under it. Further you will not be eligible for a discharge if you had one granted the past 8 years. This chapter is also called straight bankruptcy or liquidation.
In Chapter 13 or what is known as the wage-earner bankruptcy, you will need to outline a repayment plan. If the legal court agrees to this plan, the trustee in your case will be in charge of collecting those payments and handing it to the respective creditors. It will also be his responsibility to ensure that you stick to your repayment plan and schedule. There is a substantial trustee fee also involved which you will have to take care of. In the case of Chapter 13, some debtors will not be allowed to file under it because of certain limits within which the filing will be accepted. Since these are subject to change, you will have to talk to your lawyer about which category you will fall under. As is the case of Chapter 7, if you have been rejected in the past 6 months, you will not be able to file under Chapter 13.
A tip would be to work out a reasonable repayment plan. Being overambitious has often lead to irregular payments. This can lead to further complications. This Chapter is useful to those who see their situation as a temporary one and are confident of securing the funds to get out of it. Consulting a bankruptcy lawyer in any case is essential.
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