It might seem somewhat difficult to choose between Chapter 7 and Chapter 13 when filing for bankruptcy. Therefore the need to understand and dissociate both bankruptcies filing is the only way you can end up making the right choice. Foremost, you should ask yourself, what is the ultimate intend of filing for bankruptcy? This central problematic will help you find your way out.
Characteristics of Chapter 7 Bankruptcy
Accounting for 65% of all Consumer Banking filings, Chapter 7 Bankruptcy is the most frequent type of bankruptcy filing. This popular choice can be explain by the fact that it is liquidation or a straight bankruptcy as in most cases, assets would be exonerated within some few months of the bankruptcy lawyer filing bankruptcy appeal. Chapter 7 Bankruptcy is one of the faster ways of starting anew. Under Chapter 7 of the Bankruptcy Code, your creditors have no right to contact you whilst the 'automatic stay' goes into effect or subsequent to exoneration of debts.
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Characteristics of Chapter 13 Bankruptcy
This type of bankruptcy filing is a repayable plan for individual debtors, who are willing to start working on debt elimination; by employing any financial income they earn to settle their debts. Under the US Chapter 13 Bankruptcy Code, individual debtors are giving a maximum period of 5 years, within which the creditor should be paid off.
Who should File for Chapter 7?
Chapter 7 Bankruptcy is the best option for individual debtors who:
o Owe lots of medical bills or credit card
o Rent their home
o Have few or no assets apart from clothing, furniture and other supplies
o Have low or no income
Who should File for Chapter 13?
Chapter 13 Bankruptcy is recommended to:
o Individuals whose unsecured are under the line of $300,000 and whose secured debts are a little more less than $1,000,000.
o People who possess lots of property and wish to keep them
o Individuals who accumulated debt as a result of illness, job loss, injury, or temporary financial setback
o Individuals who receive a steady income
Because of the reinforcement of the Bankruptcy Abuse Prevention and Consumer Protection Act, many individual debtors will be obliged to file a Chapter 13 case given the 'means test'.
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