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Chapter 7 vs. Chapter 13
There are two basic options available to consumers under the bankruptcy laws: Chapter 7 and Chapter 13.
The major benefit of a Chapter 7 is to "discharge" or get rid of unsecured debt such as credit cards and medical bills. You will be allowed to keep certain kinds of property under the exemptions allowed by federal and/or state laws. The definition of "exempt property" differs in each state and usually includes your home, car, clothing, furniture, household appliances, and tools of your trade -- each to a certain dollar amount.
While a chapter 7 bankruptcy is appropriate under the right circumstances, its use is limited in comparison to a Chapter 13. A Chapter 13 can be used to protect "unexempt property." In a chapter 13, you pay a portion of your monthly income to a trustee for distribution to your creditors. A repayment plan is useful when you are behind on your home mortgage payments, taxes, or a car loan. A chapter 13 may be in effect from three to five years. It normally allows you to pay less than you owe. The extended payment period allows you to make smaller payments. You will be allowed to keep part of your monthly income to pay for living expenses like food, clothing, rent/mortgage, and medicine.
To qualify for a chapter 13 repayment plan, you must have regular income, and your unsecured debts must not exceed approximately $300,000. If your unsecured debts exceed approximately $300,000, you may be able to qualify for a repayment plan under Chapter 11. Proceedings under Chapter 11 are much more complicated and expensive (but not more powerful) than those available under chapter 13.
Many law firms do not offer a Chapter 13 Bankruptcy option because of the extensive law office administration required. However, the attorneys at the Humble Law Offices are happy to always offer this option.
A "Chapter 20 Bankruptcy" is an attorney-created combination of a Chapter 7 and a Chapter 13. However, it is extremely rare for the savings of a Chapter 20 to more than offset the additional attorneys' fees. In other words, we will only recommend a Chapter 20 if it is in your best interest, not ours.
After completing a Chapter 7, you may not start another Chapter 7 for six years. There is a minimal waiting period after a Chapter 13. The attorneys at Humble Law Offices can review your situation and advise whether to seek a Chapter 7 or Chapter 13. The best bankruptcy alternative for you depends on a number of variables, including the source and amount of your income, the amount and types of your bills, your desire to protect your cosigners and guarantors, the equity you have in your property, and what property you wish to keep. We will be happy to give your financial situation careful consideration and explain your rights fully, but the decision to file is left to you.
Choosing a Bankruptcy Option: 7 vs. 13
There are two basic options available to consumers under the bankruptcy laws: chapter 7 and chapter 13.
The major benefit is to "discharge" or get rid of unsecured debt such as credit cards and medical bills. You will be allowed to keep certain kinds of property under federal and/or state laws, which are termed "exemptions". The definition of exempt property or "exemptions", differs in each state, and usually includes a certain amount of equity in your car, home, clothing, furniture, household goods and appliances, tools of the trade and sometimes miscellaneous.
While a chapter 7 bankruptcy is appropriate under the right circumstances, its use is limited in comparison to a chapter 13. A chapter 13 can be used to bring taxes and secured assets current and to protect "un-exempt property." In a chapter 13, you may pay a portion of your monthly income to a Trustee for distribution to your creditors. A repayment plan is useful when you are behind on mortgage payments, taxes or a car loan. A chapter 13 may be in effect from 36-60 months. A chapter 13 almost always allows you to pay less than what you owe, usually with no interest, thus a financial restructuring, or sometimes referred to as a "reorganization." The extent of the payment period allows you to make smaller payments. You will be allowed to keep a part of your monthly income to pay for living expenses such as rent, utilities, mortgage payments, food, clothing, medicine, transportation, and even some miscellaneous and limited entertainment. To qualify for a chapter 13 repayment, you must have regular income, and your unsecured debts may not exceed approximately $1,000,000.00. If your unsecured debts exceed $1,000,000.00, you may be able to qualify for a repayment plan under chapter 11. Proceedings under chapter 11 are much more complicated and expensive (but not more powerful) than those available under chapter 13.
Many law firms do not offer a chapter 13 bankruptcy option because of the extensive law office administration required. However, I am always happy to offer this option.
After completing a chapter 7, you may not start another chapter 7 for 8 years. The waiting period for a chapter 13 is normally 4 years to obtain a discharge or less if no discharge is required. I am happy to review your situation with you without cost, and advise you of your options including but not limited to chapter 7 and chapter 13. The best bankruptcy option is different for each individual or couple, and is based on a number of variables including income, amount of debt, amounts and types of your bills, and your desire to protect cosigners and gearing towards equity and your property and which property you wish to keep. I will be happy to give your financial situation careful consideration and explain your rights fully as I believe that the most informed client makes the best client.
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