Print Posted on 09/13/2017 in Category 1

Chapter 3 or Chapter 7 Bankruptcy? A Brief Comparison to Help you Make the Right Decision

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Bankruptcy is often the last solution to end your financial woes, as it helps in either discarding the debt or repaying the debt. 

Though most of the bankruptcies that are filed in the US are Chapter 7 or 13, there are a lot of factors such as income, financial goals, assets and debts to consider before deciding between the two options. It is advised that an individual turn to bankruptcy lawyers and law firms to analyze the financial situation before filing a petition. While you look for a reputable attorney in Austin or other areas, it is also important that you know the basic difference between Chapter 7 and Chapter 13 bankruptcy. To give you a head start, we have compared the two options in the blog post. Read on. 

Understanding the Difference

Chapter 7 Bankruptcy 

A liquidation bankruptcy, Chapter 7 wipes out general unsecured debts including medical bills and credit card payments. An individual should have little or no disposable income to qualify for Chapter 7 bankruptcy. A trustee is appointed to look after each case, review bankruptcy papers and supporting documents, and sell a non-exempt property to pay the debt amount to creditors. If an individual doesn’t have a non-exempt property, the creditor does not receive any payback. 

Chapter 13 Bankruptcy 

A reorganization bankruptcy, Chapter 13 is an option for debtors who have a regular income and are capable of paying back a certain portion of their debts through a repayment plan. If you don’t qualify for Chapter 7 bankruptcy, there’s no option other than filing for Chapter 13. There are, however, a few advantages of filing for Chapter 13 such as: 

--You don’t have to give away all your property including non-exempt assets 

--You can catch up on missed mortgage payments

The Chapter 13 bankruptcy lets you make a repayment plan based on your expenses, income, and types of debts to pay back the amount. If you can afford to make a monthly payment without a fail, Chapter 13 bankruptcy is the right option. 

Final Words 

While a typical case of Chapter 7 bankruptcy takes three to four months to complete, a Chapter 13 bankruptcy repayment plan could last for three to five years. Filing for bankruptcy is complicated and instead of taking the matter in your hands, it is always better to seek professional help. Discuss your financial condition with the lawyer and make a decision that is beneficial in the long run.

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