Chapter 7 and Chapter 13 cases are the most common type of bankruptcies filed in the United States. When it comes to determining what bankruptcy case to file, you have to consider your income, asset, debt, and financial goals. What is the meaning of Chapter 7 bankruptcy? Chapter 7 refers to the liquidation bankruptcy which aims to eliminate all general unsecured debts such as medical bills and credit cards. However, for those who make too much money may file a Chapter 13 bankruptcy instead of Chapter 7. Generally, the Chapter 7 bankruptcy is recommended for low-income debtors since they have little or no asset to liquidate in paying their unsecured debts.
When a person files a Chapter 7 bankruptcy, a trustee is usually appointed to review the bankruptcy papers and documents and sells the debtor’s nonexempt properties to pay the creditors, and if there are no assets to sell, the creditors will not receive anything. For people with a steady or regular source of income, they can still file a bankruptcy case under the Chapter 13 bankruptcy and pay a portion of their debts through a flexible and realistic repayment plan. When you file a Chapter 13 bankruptcy, you get to keep all your properties including your assets that are nonexempt. The amount a debtor needs to pay under the Chapter 13 bankruptcy is based on the income, other debts, and expenses. The Chapter 13 bankruptcy case is recommended for those who simply want to catch up on a missed car payment or mortgage loan, or in paying off non-dischargeable debts such as child support arrears or alimony. When it comes to filing, Chapter 7 bankruptcy involves preparation of a large set of forms and navigation of tricky legal matters that will require the help of a lawyer.
Unemployment, medical emergencies, a death of a family member, or divorce experienced by debtors usually result to bankruptcy, and having no car, no house, or no source of income qualifies a debtor to file Chapter 7 bankruptcy. That is the very reason why Chapter 7 bankruptcy is also called as “no asset” bankruptcy. For unemployed homeowners with a house value lesser than the lien against it, the house is technically protected from liquidation, and filing a Chapter 7 can help them relieved of their obligations. Learn more about the Chapter 7 and Chapter 13 bankruptcy by visiting our homepage or website now. Know your rights in the justice system, because it is always good to know your options when it comes to filing a bankruptcy case, and you can always hire a bankruptcy lawyer to help you process your case.