3 Main Reasons To File For Chapter 7 Bankruptcy Instead Of Chapter 13
Are you overwhelmed by unsecured personal loans, past-due medical bills, credit card debts, and other crushing expenses? Or perhaps you're tired of receiving non-stop calls from disgruntled creditors. Whatever the case, filing for bankruptcy might offer the fresh start that you need.
That said, you have probably heard that there are two main bankruptcy options: Chapter 7 and Chapter 13. Given a choice, most people prefer to file for Chapter 7 instead of Chapter 13. But consider talking to a Chapter 7 bankruptcy lawyer to determine if it's the right one for you. Generally, here are three reasons you may consider filing for Chapter 7.
No Debt Repayment Plan
Probably the main reason why you may prefer filing for Chapter 7 bankruptcy is that you won't be required to continue paying your debt. A bankruptcy trustee will use your properties to pay off your creditors, so you no longer have to worry about making monthly payments.
And, this doesn't mean that you lose everything and go wander in the streets. Most states have bankruptcy exemptions that allow you to retain several types of property, like cash, furniture, clothes, and even cars up to a certain amount, known as the 'exemption limit.'
With Chapter 13, you're required to repay your creditors using a repayment plan of three to five years. This means you'll need to have a consistent income to make monthly payments to your creditors. If you're unable to complete your plan, you run the risk of your debt ultimately not being discharged.
Get Financial Freedom Quickly
Within three to six months after filing the petition, the court issues a discharge order. After that, the trustee will distribute your property to your unsecured creditors before the court officially closes your case.
However, not all your debts may be discharged. Debts that can be eliminated by Chapter 7 include credit card debts, medical bills, utility bills, deficiency balances, amounts owed on surrendered or repossessed vehicles, and uninsured car accidents judgments. Unfortunately, Chapter 7 may not eliminate government fines, most student loans, tax liability debts, child and spousal support, restitution, and forfeitures.
You Can Keep Future Income
The fact that you're going through a hard time financially doesn't mean you won't bounce back and acquire new property. The good thing with Chapter 7 bankruptcy is that any new property acquired in the future won't be included in the bankruptcy estate.
However, if your income increases, consult with your lawyer whether there is a need to notify the court. Generally, chapter 7 bankruptcy is based upon your financial situation at the period of filing, so the increase in income may not affect your circumstances.
But if the rise in income is so significant, you may be required to shift to a chapter 13 bankruptcy depending on your level in the bankruptcy proceedings, growth of income, and the provisions in your bankruptcy. Contact a company like DiFatta Law Offices LLC in your area to discuss your options.
