One question that people might ask when considering filing bankruptcy is, “What Does Declaring Bankruptcy Do?” Some may think of it as one of the worst things to happen financially, but knowing how to take advantage of this process may actually be a great opportunity for them to start over fresh.
For people with unimaginable debt or facing foreclosure can declare bankruptcy to save their home and have the debts discharged. Both Chapter 7 and Chapter 13 bankruptcy help debtors with their debt but have key differences that make one more favored for certain individuals.
So when considering bankruptcy to deal with debt, you will need to see which chapter will be better for you and to see if you meet the requirements to file the chapter. A qualified bankruptcy attorney can help you figure it out.
Types of Bankruptcies: Chapter 13 and Chapter 7 Bankruptcy
Under the law, you are able to relieve all debt or consolidate your debt if you are no longer able to pay back your creditors or lenders. The two main types of personal bankruptcies that matter to a consumer are Chapters 7 and 13. Under Chapter 7, you can have all your assets discharged by the court or significantly reduced after you liquidate some assets to pay off the creditors.
With Chapter 13, the court will grant you a payment plan that will allow better management of budget and create segmental monthly payments for a fixed number of years to pay off your debt. Having your debt discharged in a Chapter 7 bankruptcy sounds good, but it’s not for everyone.
If you have a lot of assets under your name, everything will be liquidated to pay off your debts. In the case of saving your assets and protecting yourself from foreclosure or property repossession, the second-best option is Chapter 13. The court will only reorganize your debts and make a payment plan to pay off your debt in the usual 3 to 5 years.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy usually wipes out most of your general unsecured debts without needing to pay back your creditors. These debts can be credit card bills or medical bills.
When you file for chapter 7 bankruptcy, all collection against you is stopped immediately and a letter will be sent out to the debt collectors on the bankruptcy in the process to not harass you on collecting. If you currently don’t have any non-exempt assets, your creditors will receive nothing during the liquidation of your assets to pay back your debts.
- Debt discharged
- Liquidation of assets
- Fresh Start
- More Impactful
Chapter 13 Bankruptcy
With a Chapter 13 bankruptcy, you keep all your assets and property while entering a reorganization of payments split towards paying off your debts. In some cases, a Chapter 13 bankruptcy will save a person’s home from foreclosure from the bank.
The amount that is reorganized to pay back depends on your income, types of debts, and expenses. Under Chapter 13 bankruptcy, people have 3 to 5 years to resolve their debts and in some cases will be allowed to wipe off their unsecured debts.
- Reorganization of debt
- Foreclosure Protection
- Property Protection
- Asset Protection
- Less Impactful
The Bankruptcy Process
The best thing to do when starting bankruptcy in any given situation would be to contact a professional bankruptcy attorney that can guide you through the process and help you figure out what happens when you file bankruptcy. An attorney makes it easy to file and will be there with you during the bankruptcy hearing in court.
Filing for Chapter 13 and Chapter may be different in process and cost so it’s best to explain your situation and receive an evaluation based on your situation. During this process, you will need to provide a list of your creditors and the amount of the debts, a list of contracts, a breakdown of your living expenses, and tax information.
Before filing for bankruptcy, you should look at other avenues that may be beneficial for you and something your lawyer may recommend. Some alternatives include credit counseling, debt consolidation, debt settlement, and debt management that can help you get out of debt that can be paid off. When starting a case, your attorney will help you file a series of documents to send off to the courts immediately to stop any liens or debt against you.
If you’re applying for Chapter 13, you will have a different route which includes a proposal for a repayment plan, a review with a court-appointed trustee with your documents, and a certificate of credit counseling. Your bankruptcy filing must be sent to a U.S. Bankruptcy Court to start a case.
Need Help Declaring Bankruptcy? We Can Help!
When you hire our bankruptcy attorneys at Consumer Action Law Group, we make sure that your case goes smoothly and we are there for any questions that you may have. We have been helping consumers with bankruptcy cases for more than 10 years and have had thousands of successful cases.
We offer a free consultation to callers, so feel free to call us and speak your mind about your given situation. Our bankruptcy attorneys will be able to discuss them with you. Call our firm today at (818) 254-8413.
