| Differences Between Chapter 7 and Chapter 13 Bankruptcy |
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Is the financial situation in your life such that you need to file for bankruptcy? If so, there are two types of bankruptcy that apply to the individual: Chapter 7 and Chapter 13. They differ in many ways. Learn the details of both before choosing which type of bankruptcy to file for.
Is the financial situation in your life such that you need to file for bankruptcy? If so, there are two types of bankruptcy that apply to the individual: Chapter 7 and Chapter 13. They differ in many ways. Learn the details of both before choosing which type of bankruptcy to file for. Chapter 7 is the most common. When a person files under Chapter 7, their assets are sold to pay the money that is owed to their creditors. The courts decide on the amount of payment based on an individual's situation. All of the assets are not exhausted. Each state has its own procedure as to what is to be liquidated and you may be able to keep your home and car. The laws were changed in October 2005 regarding Chapter 7 bankruptcy. You now have to pass a test. Your income must be lower than the median income in your home state. You must also not have the assets available to pay at least 25% of your debt in order to qualify. Under special circumstances an exception can be made to the testing requirements. Such was made for victims of Hurricane Katrina so they could start over after their homes were flooded. If you are not allowed to file for Chapter 7 you can appeal but it will be another court date and expense but it could be worth it. Chapter 13 bankruptcy involves repayment of the debt owed to creditors. You are given a time frame to pay off your debt and means are developed for you to do so. The assets that you own are not liquidated. The courts look at your finances and determine what you can reasonably afford to pay back to the creditors. This process is now a little different with the new bankruptcy laws. The court used to decide what was necessary for you to pay or not. Things like rent or mortgages, groceries and utilities etc were deemed necessary. Now the IRS has a formula to determine this. The government wants people to think long and hard about filing for bankruptcy. Before any bankruptcy proceedings take place, the potential filer must attend credit counseling. Also, the government can liquidate or non-exempt any assets that were purchased right before bankruptcy was declared. The attempts to hide money within property not subject to seizure are no longer an option for abusers of the system. Filing bankruptcy is very serious. Know which type you qualify for before filing. Also know that bankruptcy lawyers will charge more for their part in you filing. Author: How do you know if credit card consolidation is the right way to pay off your debt? Visit the Debtopedia website at http://www.debtopedia.com to find out more about it and how to determine if it's the best choice for you. |
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