Personal bankruptcy is a legal process that provides individuals with financial relief when they are overwhelmed by debt. It is a crucial tool for those facing insurmountable financial challenges. In this blog post, we will explore the two primary types of personal bankruptcy, Chapter 7 and Chapter 13, and discuss how our friends at The Law Offices of Neil Crane can provide expert guidance and support through a bankruptcy lawyer.
Chapter 7 Bankruptcy: A Fresh Start
Erase Unsecured Debts
Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows individuals to discharge unsecured debts, such as credit card debt, medical bills, and personal loans. This process provides a fresh financial start by eliminating most unsecured debts entirely.
Exempt Property
In a Chapter 7 bankruptcy, a bankruptcy trustee may sell non-exempt property to pay off creditors. However, many individuals can protect their essential assets through exemptions provided by federal and state laws. These exemptions often include your primary residence, vehicle, and personal belongings.
Quick Resolution
Chapter 7 bankruptcy typically results in a faster resolution compared to Chapter 13. The process typically takes a few months, allowing individuals to move forward with their lives quickly.
Eligibility Requirements
To qualify for Chapter 7 bankruptcy, individuals must pass a means test, which assesses their income and financial situation. If their income falls below the state median or they demonstrate an inability to repay their debts, they are generally eligible for Chapter 7.
Chapter 13 Bankruptcy: A Repayment Plan
Reorganize Debts
Chapter 13 bankruptcy is often called a “wage earner’s plan” because it allows individuals with a regular income to reorganize their debts and create a manageable repayment plan. This plan typically spans three to five years.
Asset Protection
Unlike Chapter 7, Chapter 13 allows individuals to retain their assets, including their home and car, as long as they adhere to the court-approved repayment plan. This makes Chapter 13 an attractive option for those who want to protect their property.
Address Mortgage Arrears
Chapter 13 bankruptcy can help individuals catch up on mortgage arrears and prevent foreclosure. It allows them to include past-due mortgage payments in their repayment plan while continuing to make current payments.
Eligibility Requirements
Chapter 13 bankruptcy is available to individuals with a reliable source of income, even if their income exceeds the state median. It is often chosen by those who want to protect valuable assets or address specific financial challenges, such as mortgage arrears.
Seek Legal Support
Choosing the right type of personal bankruptcy depends on your unique financial situation and goals. A bankruptcy lawyer will prioritize the well-being of their clients and work tirelessly to help them regain control of their finances. Whether you are considering Chapter 7 for a fresh start or Chapter 13 for a reorganized repayment plan, consulting with a bankruptcy lawyer is the first step toward achieving financial stability.
If you are facing overwhelming debt and considering personal bankruptcy, reach out to a trusted bankruptcy lawyer today. Take the first step towards a brighter financial future and a fresh start.