Understanding Chapter 7 and 13 bankruptcy
While residents in Appleton and throughout Wisconsin may be able to notice the general improvements in the national economy as compared to prior years, many people continue to struggle with high debt. In some cases, the recent recession has left financial scars that are still not healed leaving debtors continuing to seek options for debt relief.
Bankruptcy can offer the needed assistance but it is important for people considering this option to understand the different types of bankruptcy and be able to choose the right ones for their needs. In general, a Chapter 7 bankruptcy provides a complete discharge of debts while a Chapter 13 bankruptcy is a form of a structured repayment plan.
Basics of a Chapter 7 bankruptcy
A Chapter 7 bankruptcy is sometimes referred to as “liquidation bankruptcy.” This is because some assets can be sold in order to pay at least some of the debt that is owed by debtors. According to the United States Court website, a Chapter 7 bankruptcy is generally faster and easier than a Chapter 13 plan and many people can complete their bankruptcy process in as little time as a few months.
Not all assets are sold under a Chapter 7 bankruptcy as there are exemptions as both the state and the federal level that allows for people to retain a certain amount and type of assets. This means that many things like vehicles, jewelry or other personal type of items are often retained up to a designated dollar value. Persons with minimal asset levels can generally benefit from this bankruptcy.
It is important to note that the American Bankruptcy Institute points out that not all debt can be discharged via a Chapter 7 bankruptcy. Examples include child support obligations or student loans.
Basics of a Chapter 13 bankruptcy
A Chapter 13 bankruptcy can sometimes be called a wage earner’s plan. This is because under a Chapter 13 bankruptcy, the debts are consolidated and repaid over the course of a designated time period. In order to qualify for a Chapter 13 bankruptcy, the debtor must have a high enough income level at the time of filing in order to be able to afford the monthly payments. Generally the amount paid will be less than without the bankruptcy and the Chapter 13 option also protects all assets from being lost.
Monthly payments are submitted to a trustee who then pays creditors according to a pre-approved schedule. Creditors often agree to accept lesser amounts in exchange for not losing out on all payments. Chapter 13 plans run over a time from 36 months to 60 months. Home loan payments are not included in Chapter 13 plans and therefore homeowners are expected to continue to make monthly mortgage payments in addition to their Chapter 13 payments.
Learn more today
If you are considering bankruptcy, contact a qualified attorney today. Getting your questions answered by a professional will further help you to make the choice right for you.