A person who has experienced financial hardship can feel overwhelmed by knowing where they should turn. One option that most end up considering is filing for bankruptcy which is provided by the Federal law. In this case, all is handled in the federal court for the consumer to settle his debts. As a consumer, you may file either Chapter 7 or Chapter 13 bankruptcy depending on the severity of your debts and the types you have. A common consideration when people reach this point is trying to decide between the different filing types. This brief article will explain the difference between Chapter 7 and Chapter 13 bankruptcy to help determine which may better fit your personal needs. Take note that these differences so that you’re armed and prepared when you discuss them with a licensed bankruptcy attorney such as Shaw Defense in Houston. While not all bankruptcy lawyers have the consumer protections available such as the one mentioned, they will consider your state’s statutes and advise you on the best course of action.
In Chapter 7, you will have the opportunity to get your unsecured debts discharged, which commonly include your personal loans, mortgage debts, medical bills and credit cards. Right after you file this case, all of your property will be temporarily supervised by the case trustee and of course the federal court.
Furthermore, if your property is considered exempted then it would be turned back to you. But if not, then the bankruptcy trustee will consider it as not exempted and would sell it, which the profit would be distributed to your creditors. The importance of having this case with attorney is that, you will be able to determine if your property is exempted or not. The exemption varies from the jurisdiction that you are living in. Take note that in this case, it will last from 4 to 5 months and when the case is over, the creditors has no right to collect for anything.
While in Chapter 13, you will be able to reorganize your finances and pay your creditors in a span of years. If you are earning less income than the average, you will be given a plan to pay your debt for 3 years. But if you are earning more than the average, then you will be given a plan for 5 years. Basically, chapter 13 is for those who want to pay their creditors and make a plan to pay them in a span of time.
In addition to that, the attorney will help create the plan for your payment, which will be said as your disposable income and would be sent directly to your creditors. Your gross earnings will be calculated through IRS and they will base your disposable income to the amount of money that is left for you, because they will deduct all your allowed expenses and the rest is going to be your disposable income.
Whatever process you choose, the important thing about filing a bankruptcy case is that you get the chance to protect yourself from creditors legally. You are given a chance to pay your debt either in Chapter 7 or Chapter 13 process, depending on what process you wish to get for your legal protection from creditors. Also, see more at Shaw Defense bankruptcy office.