Chapter 7 Vs. Chapter 13 Bankruptcy

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When you are considering filing for bankruptcy, you may have a lot of questions and concerns about which chapter to file under, your eligibility to file for bankruptcy, and how to go about ensuring that your rights are protected. Our Columbus Bankruptcy Attorney at The Nesbitt Law Firm is proud to offer outstanding legal representation to clients facing difficult financial situations and we strive to offer personalized and reliable service to each and every individual who retains our firm.

Under the United States Bankruptcy Code, individuals and business owners can file for bankruptcy underChapter 7 or Chapter 13. These two chapters have been created to offer debt relief to financially strapped individuals and help eliminate the stresses of creditor collection attempts, wage garnishments, and repossession.

Determining which chapter to file under can also be stressful, and without the assistance of an attorney from The Nesbitt Law Firm, you may be struggling to navigate the federal bankruptcy code alone. Below, we encourage you to review the various differences of Chapter 7 and Chapter 13 bankruptcy.

BENEFITS OF CHAPTER 7 BANKRUPTCY

  • A Chapter 7 bankruptcy can complete the debt-elimination process and discharge your debts within as little as 6 months.
  • If you do not foresee having the means that would allow you to repay your debts over a period of 36 to 60 months, a Chapter 7 bankruptcy may help you eliminate your debts quickly and with little cost to you.
  • When you receive a Chapter 7 bankruptcy discharge, you will most likely not owe your creditors anything. (There are some exceptions to discharge.)
  • Chapter 7 can provide the opportunity for you to strip certain non-consensual liens on property.
  • You are assumed eligible for Chapter 7 relief so long as you qualify under the means test and disposable income test and comply with all court and trustee requests.
  • Oftentimes, you can qualify for liquidation of debts while retaining all or many of your assets, including retirement accounts, life insurance policies, 529 plans, vehicles, real estate, etc. Talk to your attorney about your specific situation.

BENEFITS OF CHAPTER 13 BANKRUPTCY

  • Chapter 13 bankruptcy allows you to protect your home from foreclosure and your car from repossession. Having a court-approved repayment plan prevents creditors from attempting to collect on the debts outside of the terms set forth in the plan.
  • While exemptions may apply, there is no complete guarantee that your assets will be safe from liquidation in a Chapter 7. The main benefit to filing a Chapter 13 bankruptcy, is that it protects your assets from being seized and liquidated by creditors.
  • The Chapter 13 plan typically allows for you to have anywhere between 36 to 60 months to repay your debts and catch up on your payments, without having to pay a lump sum to eliminate your debt.
  • Often, a Chapter 13 plan will only require partial repayment to unsecured creditors; this is the dividend plan, which means you may pay pennies on the dollar to creditors in order to resolve your debts once and for all.
  • At the end of the Chapter 13 plan, your secured long-term creditor account (i.e. mortgage) will be “current,” and you will have maintained possession of your property throughout the process as well as to have paid down the loan during the time you were in the repayment plan.
  • If your retained property is underwater, Chapter 13 may allow you to strip certain liens, whether consensual or non-consensual, including second mortgages, home equity lines of credit, and judgment liens.

If you have questions or concerns about your legal situation, do not hesitate to contact The Nesbitt Law Firm right away and speak with the trusted bankruptcy lawyer from our firm!


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