Advantages of filing Chapter 7 Bankruptcy as Opposed to Ch 13
A normal Chapter 7 case starts and ends in a three to four month period of time, with the debtors filing and then emerging debt-free regarding dischargeable debts except mortgages and other secured debt like car loans, as well as certain types of non-dischargeable debts like some IRS debt, student loans, fraudulent and criminally based debts, and also unpaid family support obligations like child support.
Although property can be liquidated in bankruptcy during a chapter 7 case, most debtors don’t see any kind of liquidation efforts due to the fact that bankruptcy allows most of a typical debtors’ assets to be held to be exempt from liquidation. Most necessities are protected, and certain assets fall into protected categories. For example, if you own a home, your home is protected in chapter 7 bankruptcy to a certain extent. Some states allow for you to own your entire home, regardless of the value of the home, while other states’ exemptions hold that your equity to a certain point is protected with the excess being non-exempt as an asset. For most, the necessities are protected and chances remain good that the case is that you will keep most or all of your personal property unless it is a luxury item like a yacht or some other type of unprotected class of asset. Other exceptions to this rule include cases where you might have pledged an asset as security for a debt, such that in order to obtain the loan, a bank or other lending institution required that you pledge your car title in order to obtain a title loan.
However, not all people are eligible for Chapter 7 bankruptcy. For those whose incomes are over the median income for your zip code, it is held that you may have sufficient income to pay back a portion or all of your debts through use of Chapter 13 bankruptcy repayment. The way this works is that your income less your expenses brings the budge to arrive at a number called disposable income. Only certain allowed monthly payments and expenses are allowable for use in such a budge to determine disposable income according to the bankruptcy court. Certain family obligations such as court ordered child support, IRS debts, and payments toward secured debts like payment of a monthly mortgage and auto loan would be allowed.
One of the main reason that clients are recommended to file a chapter 7 bankruptcy is the simplicity of the bankruptcy type. It is started and finished typically within a window of 3-4 months as opposed to a chapter 13 bankruptcy taking 3-4 or even 5 years. A chapter 13 bankruptcy also includes stipulations and requirements by the court to check-in with the trustee’s office regularly and other obligations. On the other hand, a chapter 7 bankruptcy is essentially complete within that 3-4 month period of time, at such time, the debtor is free to increase income if that is possible in every way they are able to do so in order to increase their financial situation and improve the world around them through regular course of business and employment. In a chapter 13 bankruptcy, if income increases, the trustee wants to increase the monthly trustee payment in order to pay back a greater portion of the unsecured debts as originally set forth in the chapter 13 repayment plan obligations.
While a chapter 7 bankruptcy is excellent, it does provide some drawback as opposed to a chapter 13 bankruptcy in that there is no allowance made for catching up arrearages from certain secured debts like a home mortgage. In such cases where the debtor owns a home and has become temporarily behind on the mortgage, filing chapter 13 bankruptcy to protect a home from foreclosure would allow for the debtor to stop foreclosure dallas, catch up the back payments, and remain in the home. In some cases, a chapter 7 bankruptcy still remains the best way to deal with such situations as a method of strategic default in which the bankruptcy simply delays foreclosure, providing the debtor time to get money together and prepare for a move to a different living situation. It is sad to leave a home, but if the home is under water, this can often be the best option and can be helped via a chapter 7 bankruptcy filing. Contact a reputable dallas foreclosure attorney for more information about options to stop foreclosure or to simply discharge unsecured debt through filing bankruptcy.