Are you planning to file a bankruptcy? Are you caught between the Chapter 7 vs Chapter 13 dilemma? Then hold on for a second and read this article. If you are planning to exit the age thinking that you will be anyway hiring a lawyer and do not need this, think again. The lawyer may do the task for you, but that doesn’t mean that you should be clueless about the terms. Having a basic understanding of the terms will help you ensure that the lawyer is taking the right route.
What is Bankruptcy?
As you are aware, bankruptcy is a process which allows individuals and businesses to repay parts or all of their debts. The repayment is done under the protection of the federal bankruptcy court. Bankruptcy is divided into many chapters and Chapter 7 (liquidation) and Chapter 13 (reorganization) are the ones we will be discussing in this article.
Chapter 7 Bankruptcy
If you are filing bankruptcy under the Chapter 7 section, you are asking the court to write off most part of the debts you owe. In exchange, the bankruptcy trustee can attach any of your property that is not exempted from the collection. The trustee can sell the property and distribute the amount among the creditors. The process might take around six months. You also need to go through credit counseling with an approved agency.
What Do You Get to Retain Under Chapter 7 Bankruptcy?
The exemption laws differ from one state to another. However, you mostly get to retain the below items:
- Equity on your home under a homestead exemption
- The cash value of your Insurance policies
- Retirement plans
- Personal belongings such as clothes, furniture, household goods etc.
- Social security, welfare, and unemployment insurance
- Tools that are required for your profession
Chapter 13 Bankruptcy
If you are considering Chapter 13 bankruptcy, you need to file a plan for repayment. You may choose to repay all or portions of your debt over a period. The amount will be decided based on your income, the types and amount of debts, and the properties you own. The best part of Chapter 13 bankruptcy is that you will not lose any of your belongings as you can repay your debts using your own income.
Now that you have enough information, we hope you will be able to easily decide between the Chapter 7 vs Chapter 13 dilemma.