The Constitution allows Americans to relieve some or all of their debts when they are no longer able to meet their financial obligations. When filing for personal bankruptcy, individuals have two choices. They can file Chapter 7 or Chapter 13. A Chapter 7 bankruptcy allows consumers to discharge some or all of their debt, while Chapter 13 bankruptcy allows consumers to set up a repayment plan to pay off debt.
Chapter 7 Bankruptcy
Chapter 7 can help you discharge a portion of your debt once your liquid assets have paid off the debt. You may already have some liquid assets in your possession. These are assets that can be converted to cash easily. Bank accounts are examples of liquid assets. Some liquid assets must be turned over to creditors as partial repayment for debt. The liquid assets are then known as nonexempt assets. Assets that cannot be used by creditors when filing for personal bankruptcy are called exempt assets.
After the nonexempt assets are received by creditors, any debt that still remains is discharged. Creditors may no longer contact you about the debt.
In order to qualify for Chapter 7 bankruptcy, consumers must pass a means test. This test will prove whether or not your income meets the minimal income level for your state. If you do not pass the test, you will have to file Chapter 13 instead.
Chapter 13 Bankruptcy
With Chapter 13, consumers can repay their debts under a 3 to 5 year repayment plan. When consumers file for Chapter 13, they must also have a repayment plan ready to give the court. You should begin making payments to the court after submitting the plan even if the court has not yet approved the repayment plan. All debt that remains is discharged after you have finished making your payments to the court.
Chapter 13 is the best option for those who prefer to maintain possession of your assets.
Filing for personal bankruptcy is a complicated process that consumers should not navigate alone. To ensure all paperwork is filed correctly, seek the legal advice from a bankruptcy attorney.
Do you feel as though you have more debt than you can manage? Get the information you need to make an informed decision by speaking with the knowledgeable attorneys at Douglas and Jacobson Law Firm.