The Bankruptcy Process

The Bankruptcy Process – Chapter 7 vs Chapter 13

The Bankruptcy process isn’t usually something that anybody seeks out deliberately. In addition to the damage your credit score will take, there are often emotional factors that may prevent people from acting in their own best interests. While banks and corporations make use of the US Bankruptcy code on a regular basis simply as a matter of business, they seem to take a perverse pleasure in attaching a moral stigma to it when individual consumers who may be indebted to the same banks and corporations are the ones filing. This is a real double standard, and if you are aware of it, it will help you in realizing that filing bankruptcy is neither a moral issue nor a statement of your character nor of who you are. It is simply business, and should be seen as such.

The chapter 13 bankruptcy process is distinct from chapter 7 bankruptcy, in that in chapter 7, ones debts are completely liquidated, and one’s assets above a certain amount (typically around $40,000, including automobiles) are sold to distribute between your creditors. In Chapter 13, however, if your income is above a certain threshold (which can be above $70,000 for a family of 4, depending on your state of residence), then you may be required to repay a portion of your debt on a 3 to 5 year schedule. However, the repayment program won’t exceed your financial capabilities. Additionally, if you qualify for a Chapter 7, your lawyer will inform you of this fact.

If your debt is simply too much to handle, regardless of your income or lack thereof, it is in your best interests to speak with an established Bankruptcy lawyer in order to ascertain your options. It may be more prudent in some cases to seek debt settlement with your creditors, or to work out a loan modification with your mortgage lender if your mortgage is what has brought you to the financial brink. However, if you are being constantly harassed by your creditors and simply don’t have the means to repay, then you have every right in the world to exercise your legal and constitutional rights in the United States Bankruptcy Court.

Chapter 13 Bankruptcy is usually selected by debtors in order to settle and consolidate their debts.  Debtors should always consider the assistance and guidance of his attorney in order to insure that the case is handled properly and that the outcome of the case will be positive.  When a debtor enrolls himself for the Chapter 13 bankruptcy process, the trustee distributes a percentage of his income between his creditors. The division is decided by the courts, or more accurately, signed off on by the courts after being determined at the meeting of trustees, in which your lawyer will represent your interest in attempting to procure as low as a payment as possible for you.

Once the three to five year repayment period is over, your bankruptcy will be discharged, and you will be free of any unpaid debts. Tax debt can also be included in Chapter 13, whereas it cannot be included in Chapter 7, so if you the IRS a large sum, you should determine if Chapter 13 would be more to your advantage than Chapter 7.

This is just a brief overview of the process of Chapter 13 bankruptcy. The most important thing to do as an individual is to consult with an attorney. Many people avoid filing thinking that they only qualify for a Chapter 13, only to discover upon speaking with a good bankruptcy lawyer that they can indeed qualify for a Chapter 7 – and have their debt problems eliminated once and for all.