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Why choose 7 vs 13 bankruptcy

why choose 7 vs 13 bankruptcy

Chapter 7 vs 13 Bankruptcy There are two basic types, or Chapters, of bankruptcy: Chapter 7 and Chapter Which bankruptcy you choose depends upon the type of debt you have and whether you may need a little ongoing help managing your finances after you file. Jul 11,  · Unlike Chapter 13 bankruptcy, Chapter 7 bankruptcy rules do not impose a limit on the amount of debt a filer may have. Under Chapter 13, a debtor is ineligible if secured or unsecured debt exceeds debt limits. No repayment plan. Under Chapter 7, the debtor does not have to repay debt in a court-approved repayment plan, unlike a Chapter Jun 18,  · Chapter 7 Bankruptcy: Chapter 13 Bankruptcy: Basics: A Chapter 7 bankruptcy will discharge most types of unsecured debt. The trustee will try to sell any significant nonexempt property in order to repay your creditors. Basics: In Chapter 13 bankruptcy, you repay your creditors (some in full, some in part) through a Chapter 13 repayment plan. why choose 7 vs 13 bankruptcy

There is no specified debt-level limit and no required income. However, Chapter 11 is the most complex form of bankruptcy and generally the most expensive. What this means is that the firm will contact its creditors in an attempt to change the terms on loans, such as the interest rate and dollar value of payments.

A Chapter 11 case starts with the filing of a petition to the bankruptcy court where the debtor lives. The petition may be a voluntary one, which is filed by the debtor, or an involuntary one, which is filed by creditors that meet certain requirements. Department of Justice. Like Chapter 7, Chapter 11 requires that a trustee be appointed. However, rather than selling off all assets to pay back creditors, the trustee supervises the assets of the debtor and allows business to continue.

The restructuring only changes the terms of the debt, and the firm must continue to pay it back through future earnings. If a company is successful in Chapter 11, it will typically be expected to continue operating in an efficient manner with its newly structured debt.

If it is not successful, then it will file for Chapter 7 and liquidate. Administrative Office of the U. The National Law Review. Securities and Exchange Commission. Corporate Finance. Investing Essentials. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Bankruptcy Basics. Types of Bankruptcy. Personal Bankruptcy. Corporate Bankruptcy. Bankruptcy: Your Legal Rights. Bankrupty Terms C-I. Bankrupty Terms J-Z. Table of Contents Expand. Chapter 7. Before choosing a bankruptcy chapter, you should compare them so that you fully understand what you are getting into.

You can also ask a credit counselor which chapter you should choose. Please help us continue to provide you with our trusted how-to guides and videos for free by whitelisting wikiHow on your ad blocker. Log in Facebook. No account yet? Create an account. Edit this Article.

We use cookies to make wikiHow great. By using our site, you agree to our cookie policy. Learn why people trust wikiHow. Chapter 13 Bankruptcy. Explore this Article parts. Related Articles. Part 1 of Check if you earn too much for Chapter 7. The median is based on your family size, so that a family of four has a higher median than a single person. You may also qualify even if above the median. There are also online calculators you can use. Identify Chapter 13 debt limits.

You cannot file for Chapter 13 if you have too much debt. Choose Chapter 7 if you are a business. You cannot file a Chapter 13 as a business, unless you are a sole proprietor.

Other business entities must file a Chapter 7. They may also file a Chapter 11 if they want to reorganize their debts and stay in business. Learn about the credit counseling requirement.

Both Chapter 7 and Chapter 13 require credit counseling before you can apply. The counselor will assess your debts and see if you can avoid bankruptcy altogether. This course will help you understand how to create a budget and avoid financial difficulties in the future. Part 2 of Identify different types of debt. The bankruptcy treats different types of debt differently. Some are considered more important than others.

Secured debt. For example, your home secures your home loan and your car probably secures your car loan. If you default on a secured loan, the lender can seize the asset.

This debt has no asset backing it. Most unsecured debt is credit card debt, personal loans, or medical debt. Priority debts. Priority debts are not dischargeable in bankruptcy. Common priority debts include child support, alimony, certain taxes, and criminal fines or penalties. Understand the effect of a Chapter 7 discharge. In a Chapter 7, your unsecured debt will be wiped out so long as you incurred the debt before filing your bankruptcy petition.

However, you cannot discharge secured debts. Learn about the Chapter 13 repayment plan. In a Chapter 13, you need to repay some of your debts. You will come up with a repayment plan that will last three to five years. How much you must pay will depend on the type of debt you have: [10] X Research source Priority debts.

Administrative claims. Secured debts. However, you can catch up on your unpaid mortgage payments by spreading them out over the course of your repayment plan. In a Chapter 13, you can strip a junior mortgage from your home in some situations.

Unsecured debt. The amount will depend on how much disposable income you have each month after paying necessary expenses. If you make all payments under your payment plan, remaining unpaid debt will be wiped out. Part 3 of Understand what the trustee does with property. You should also check with an attorney. In a Chapter 13, the trustee does not sell your property.

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