Personal Bankruptcy- Which Is Right Ch 7 Or Ch 13
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by: AdrianFletcher
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Bankruptcy laws in the United States are created by the federal government and administered by the Bankruptcy courts. The aim of the laws is to mediate between debtors and their creditors. They aim to retrieve any money that is owed to creditors without completely ruining the person that owes the money. Nearly one million people in the US will go bankrupt during the year and file for bankruptcy. This article will examine the options open to people in this position that are filing for personal bankruptcy.
Filing under Ch7
Filing chapter 7 personal bankruptcy is the most common form of personal bankruptcy. Essentially it is a court arranged way to liquidate your assets and use this money to service your debts. The process involves drawing up a list of personal assets that a court appointed trustee will sell off. The court will then distribute the money from this process to all the creditors. Chapter 7 bankruptcy costs approximately $300 for a filing fee. It can be filed once every 7 years by the individual.
Filing Chapter 13 Personal Bankruptcy
Unlike chapter 7, chapter 13 bankruptcy does not cancel out your debt but it does allow you to keep all your assets. chapter 13 is a way to set up a payment plan and an agreement between debtor and creditors about how the debt will be paid off. This agreement is reached in the bankruptcy law courts. A trustee is assigned to the debtor by the courts. The trustee is responsible for drawing up the payment plan and ensuring that it is followed through. The debtor will give money to the trustee each month that will then be apportioned to the various creditors. The debt is only canceled out when all the outstanding debts have been paid but the aim of chapter 13 bankruptcy is to structure the payment plan so that the debtor can meet the conditions of the creditors without harassment.
Although both these types of personal bankruptcy will eventually clear your debts there are some things to consider before filing for one or the other. Chapter 7 will be a quick way of removing this debt but it will also give you a bad credit history and make it harder to recover from bankruptcy. Some personal assets that may be exempt from liquidation, like your home and car need to meet a specific criteria before they are eligible. You must owe 80% of the mortgage on the home. The car must be valued at less than $2000. In chapter 13, it will take longer to remove the debt but you will not lose any assets. However, the debt you will be paying off has to match the following criteria. You can't have a unsecured debt in excess of two hundred fifty thousand dollars. You can't have a secured debt that is more than seven hundred and fifty thousand dollars.
Thus it is important to know what you are getting yourself into before going for one or the other. You should know all the criteria for each chapter and the ramifications should you decide on one. People are often advised to use a bankruptcy lawyer in this situation because they understand the laws and can give you good advice on which chapter best suits your situation best.
About the Author
Learn how to recover from bankruptcy quickly and getting unsecured credit cards after bankruptcy.
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