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| Chapter 7 Versus Chapter 13 Bankruptcy |
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| Written by William Blake |
| Wednesday, 19 November 2008 12:18 |
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Are you at that financial point in your life where you're considering filing for bankruptcy? There are two types of bankruptcy for you to consider as an individual: Chapter 7 and Chapter 13. They are very different and you need to learn the details of both before choosing one. Chapter 7 bankruptcy is the one that most people seek to file. When a person files for bankruptcy under Chapter 7, their assets are liquidated to pay what is owed to the creditors. The courts decide on a reasonable amount for payment based on individual circumstances. 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. In October 2005, the laws concerning Chapter 7 bankruptcy were changed. Now, there are tests that have to be passed in order to file for Chapter 7 bankruptcy. A person's income must be lower than the determined median income for the state in which they reside. Also, a person must not have the assets available to pay at least twenty-five percent of their debt owed in order to qualify to file under Chapter 7. 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. It is not easy to file for bankruptcy. A potential filer must first attend credit counseling. The government can also take any assets that were obtained just prior to declaring bankruptcy thus not making it an option to hide money within property previously purchased by abusers. 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. About the Author: How do you know if credit card consolidation is the right way to pay off your credit cards? Visit the Debtopedia website at http://www.debtopedia.com to learn more about it and how to determine if it's the right answer for you. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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