Chapter 7 vs. Chapter 13
Learn from a San Diego Bankruptcy Attorney
The United States Bankruptcy Code provides six different types of bankruptcy
which can be used by individual and corporate debtors to find relief from
their creditors and to discharge their debts. These are contained in the
Chapters of the Bankruptcy Code, including:
- Chapter 7
- Chapter 9
- Chapter 11
- Chapter 12
- Chapter 13
- Chapter 15
The vast majority of individuals and families who pursue
bankruptcy in San Diego and nationwide do so by using either Chapter 7 or Chapter
13. Each of these Chapters has its own advantages, and it is important
to carefully weigh your options to ensure that you choose the one that
will be most effective in helping you get out of debt and making a fresh
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Advantages of Chapter 7
Perhaps the greatest advantage of
Chapter 7 bankruptcy is the fact that it typically takes only a few months to complete.
It is the fastest type of consumer bankruptcy. Furthermore, it does not
require that you pay back any more of your debt, as compared with
Chapter 13, which involves a repayment period of either three or five years.
On the other hand, Chapter 7 bankruptcy is referred to as "liquidation
bankruptcy," because the court will assign a trustee to oversee your
case and attempt to sell off some of your personal estate in order to
repay your creditors. The vast majority of Chapter 7 bankruptcies are
"no-asset" cases, because a San Diego bankruptcy lawyer can
usually make use of exemptions to remove most or all of your assets from
the reach of the bankruptcy trustee.
Reasons to Choose Chapter 13
Chapter 13 bankruptcy may not be as fast as Chapter 7, but it is in many
ways more effective. To begin with, it is often possible to roll missed
mortgage payments into the repayment plan, which gives you between three
and five years to catch up on your mortgage. While Chapter 13 does involve
repayment of debts, this is normally only a partial discharge because
any amounts remaining at the end of the repayment period will then be
discharged. Chapter 13 does not leave you exposed to the liability of
losing your assets to liquidation, and the eligibility requirements are
far more generous:
Instead of having to pass a
means test, you simply have to demonstrate that your debts are not above a certain
level (currently $360,475 for unsecured debt and $1,081,400 for secured
debt). It is also important to note that although Chapter 13 does require
that you continue paying on your debts for a limited period of time, it
does still provide immediate relief from creditor actions such as wage
repossession, and foreclosure because you will be protected by an automatic stay against
your creditors and debt collectors.
Which type of bankruptcy is right for you?
Most people who contact us at San Diego Legal Pros for help in declaring
bankruptcy want to pursue Chapter 7, for the simple reason that it is
a much quicker way to get out of debt. When you meet with a San Diego
bankruptcy lawyer from our team for a free consultation, we will take
the time to fully review your situation and determine whether Chapter
7 is right for you or if your interests might be better served in the
long run by filing under Chapter 13.
We can also look over your current financial situation to determine whether
or not you are eligible for Chapter 7. Whichever course of action you
choose, we are ready to assist you with every aspect of the case and work
to help you enjoy the greatest possible benefit from this opportunity
to put an end to your problems with debt!
Contact San Diego Legal Pros today
to discuss which bankruptcy fits your specific needs.