Filing for bankruptcy is an emotional and complicated decision to make. But once a person has decided to move forward with the process, the next major question to ask is whether to file for Chapter 7 or Chapter 13. There are pros and cons to both. People or organizations who qualify for one may not qualify for the other.
Ultimately, it's best to work with legal counsel to determine the right option for an individual's circumstances. When researching and interviewing a bankruptcy attorney, it's wise to be educated and be prepared with a list of questions. Here is an overview of the two insolvency options to help you be a more informed consumer.
Chapter 7
This is the quickest and simplest option available to individuals, married couples, corporations and partnerships. A bankruptcy attorney can help you figure out if you can or can't qualify to file based on the IRS guidelines for your income and expenses. In the most basic overview of the qualification process, if one's income is less than then state's mean, then they are likely qualified for it. If it is more, then they will usually need to file for Chapter 13.
This is the quickest and simplest option available to individuals, married couples, corporations and partnerships. A bankruptcy attorney can help you figure out if you can or can't qualify to file based on the IRS guidelines for your income and expenses. In the most basic overview of the qualification process, if one's income is less than then state's mean, then they are likely qualified for it. If it is more, then they will usually need to file for Chapter 13.
The primary advantage of this is the elimination of most or all one's unsecured debt, meaning debt that is not attached to any property. This means that nothing will be owed for debt including credit cards, medical expenses and utility bills.
The other notable benefit is that it is usually a much faster process to a fresh financial start. Usually the case will take only three to four months for a bankruptcy attorney to complete from the time it is filed. The disadvantage here is that your assets are subject to seizure and sale by the government.
Chapter 13
Under this bankruptcy, an individual or sole proprietor must be working or have a consistent income. With this option, a debtor is set up on a debt repayment plan, usually lasting three to five years. This means that they can get caught up on the property over time and prevents them from having to come up with all the money immediately.
Under this bankruptcy, an individual or sole proprietor must be working or have a consistent income. With this option, a debtor is set up on a debt repayment plan, usually lasting three to five years. This means that they can get caught up on the property over time and prevents them from having to come up with all the money immediately.
For those who qualify, this option is usually best for people who have mortgages they want to keep or they have things like taxes and child support that cannot be eliminated by the one discussed earlier. The attorney will usually tell you that the other main benefit of this is the 100% protection of your valuable assets from seizure by your creditors.
