Personal Bankruptcy - Is Chapter Seven Or Chapter Thirteen The Best Option

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Posted on February 24, 2008
Filed Under Debt Consolidation, Avoid Bankruptcy, Business Bankruptcy, Chapert 11, Chapter 13, Blog Carnivals |

Bankruptcy laws in the US are set by the federal government and administered in the law courts. The purpose of the laws is to reach an equitable agreement between the person filing for bankruptcy and those that are owed money. The laws try to get as much of the money that is owed to the creditor without making it impossible for the debtor. It is thought that nearly one million people will go bankrupt this year in the United States. They will consider filing for bankruptcy. This article will cover the ways they can go if they decide to file for personal bankruptcy.

Filing under chapter 7 personal bankruptcy

Filing chapter 7 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

Chapter 13 is a little different from chapter 7. The purpose of filing for chapter 13 is to reduce your debt but unlike chapter 7 it does not cancel out the debts. Again, it is administered by a court appointed trustee. The trustee will help you to set up a payment plan. This is agreed by you and your creditors in court. Once the payment plan is in place then you will find the money each month and give it to the trustee. The trustee will then distribute the money as per the agreement in court to various creditors. The aim of chapter 13 is to give the individual a chance to pay off his/her debts without losing all of their assets. However the debts are not cancelled out until they are fully paid. This may take many years depending on the sum of money owed.

Both of these types of bankruptcy will result in you removing your debt. One is quicker than the other but has longer lasting repercussions to your credit history. Each has some criteria that are worth understanding before deciding if it is right for you. Chapter 7 for instance, does not exempt personal items from liquidation unless they are of a certain value. For instance, your home is not exempt unless you owe 80% of the mortgage. Your car is not exempt unless it’s value is less than $2000. In chapter 13, your unsecured debt must not be more than two hundred fifty thousand dollars. Your secured debt cannot be more than seven hundred and fifty thousand dollars.

The bottom line is that you know the rules and regulations of the various chapters well before ever filing for one or the other. It may be an idea to employ a lawyer versed in the bankruptcy laws who can advise you on the best option for your particular case.

Find out how to recover from bankruptcy quickly and getting unsecured credit cards after bankruptcy at http://www.bankruptcyfixup.com Adrian Whittle writes on dealing with debt and bankruptcy.

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