Here are a few questions that we ask about the topic bankruptcy:
• Will a bankruptcy proceeding help me become debt-free? And what is a bankruptcy?
• Which bankruptcy option do I need to choose if I have a property that I want to retain ownership with? Is there a disparity among the concept of bankruptcy described in both Chapter 7 and 13?
• Is it possible to pick between the bankruptcy described in Chapter 7 or 13? Which option do you think is best for me?
Will a bankruptcy proceeding help me become debt-free? And what is a bankruptcy?
It is important to discuss the overview of bankruptcy so that we can answer this query. The term Bankruptcy used in the federal court process that aids businesses and individuals to walk free of their insurmountable debts and also pay their creditors. It is categorized into two types which include liquidations and reorganizations. If you are permitted to file for bankruptcy, then the court will be able to guard you during the entire proceeding.
There are various categories of bankruptcies but only Chapter 7 and 13 proceedings are considered to be common. The Chapter 7 bankruptcy fall in the liquidation category which means that if you have a property, it can be take from you and sold by means of liquidation so that you will be able to pay your debts back. On the other hand, Chapter 13 bankruptcy fall under the category of reorganization which means that you can retain ownership of your property in the end but you need to give your creditors a plan on how you will repay your debts in a given years to which three years is the minimum grace period.
Whenever you file for bankruptcy, the court will usually give a protective order which is called an “automatic stay” that will prevent creditors from demanding you payments for your loans. This order binds the creditor involved and the court has the only power to revoke the automatic stay so that they creditor can start collecting your payment.
There are different categories of debts that are not easily eliminated through any kind of bank proceeding. Child support, over due taxes and alimony pays can’t be erased compared to credit card debts. Moreover, student loans are also not dischargeable unless that it can be proven that this debt causes burden to the debtor and, in most cases, it is very hard to prove that it causes burden. If the creditor can also show the court that a debt is not dischargeable, then that debt can also withstand the bankruptcy proceeding.
Which bankruptcy option do I need to choose if I have a property that I want to retain ownership with? Is there a difference between the concept of bankruptcy described in both Chapter 7 and 13?
There is big difference between Chapters 7 and 13 bankruptcies. It was mentioned earlier that Chapter 7 is all about liquidation bankruptcy while Chapter 13 is about reorganization. Like an auction at a department store which is about to go out of business, your property has a high chance of being sold by the bankruptcy trustee. To discharge your debts, the profits generated from the sale will be given to your creditors.
Chapter 13 bankruptcy, on the other hand, requires you to submit a repayment plan that will assure the creditors that you can still repay your debts base on the income that you make. You also need to work with the court on the sum payment you need to set aside to repay your creditors in a given time.
If you opt to go through Chapter 13 bankruptcy, then you will not be able to sell any of your property to pay your debt because you agreed to make a repayment plan based on the income that you make. This is not the case for Chapter 7 bankruptcy. On the other hand, it is important to take note that there are different types of property that you can only sell and so here is a list of the eligible and not eligible properties to be sold under the state’s law.
Properties that are not exempt in your state and are also eligible to be sold under the duress of Chapter 7 bankruptcy:
• Coin, stamp and other valuable collections
• Bank accounts, bonds, financial investments and stocks.
• Second car
• Second home or homes that you do not consider as primary residence
• Valuable heirlooms
• Valuable musical instruments like pianos and expensive string instruments unless they are used mainly in your career as a musician
Properties that are exempt in your state and not eligible to be sold under the duress of Chapter 7 bankruptcy:
• Portion of your home equity
• Automobiles that do not exceed the value of your debt
• Household appliances and fixtures
• Jewelry with low cash value
• Clothing and common household goods
• Food stamps, social security, unemployment benefits
• Tools used in your profession
• Damages paid to you from personal injury lawsuits
• A part of your earned and unpaid wages
Can I choose either the bankruptcy described in Chapter 7 or 13? Which option do you think is best for me?
The answer to this question is dependent on whether you were able to meet the eligibility requirements for both categories of bankruptcy. If you fail to meet the requirements for both categories, then you can choose which one is best for your situation.
If you are making an income that is higher than the median income for a family, then you cannot file for Chapter 7 if your income will allow you to pay back a portion of your debts within a given 5 year grace period.
For Chapter 13, it is only a good option for debtors who have less than $1,010,650 in their secured debt and also $336,900 in their unsecured debts. If you fail to meet this requirement, then you are not legible to file for Chapter 13. These amounts are accurate but they may change every time the law gets amended.
In most case, a lot of people file for Chapter 7 bankruptcy since they often meet the eligibility requirements. Moreover, they may not need to pay back a portion of their debts and this proceeding is faster than Chapter 13 in order for you to be able to pay your debts fully.
On anther light, Chapter 13 can also be a good choice for you if you are only behind your debts. This means that you do not need to go on great lengths as to have your home or car repossessed just because you were not able to pay for your debt for a few months.