What to Know When Filing for Bankruptcy?

Bankruptcy refers to a legal process through which different parties, such as individuals or even organizations, who cannot pay off their debts may try to ask for relief from some of their debts. The different types of bankruptcy include Chapter 7 bankruptcy, chapter 11 bankruptcy and chapter 13 bankruptcy.

Many different law firms specialize in helping individuals file for bankruptcy, such as Sasser law firm. All of these firms are required to follow the laws of the states that they are present in; thus, depending on where you live, the laws may differ.

Differences That Can Be Found Between Chapter 7 and Chapter 13 Bankruptcy

Type of Bankruptcy

Chapter 7 bankruptcy is liquidation, which means a business’s assets are used to pay off the creditors, and if any extra assets are left, then the shareholders are also paid off. In chapter 13 bankruptcy reorganization occurs, which means that the company will either shut down or sell divisions, lay off workers, cut the budget and replace management.

Who is Allowed to File For it?

In chapter 7 bankruptcy, individuals or even business entities can file for bankruptcy. However, in chapter 13 bankruptcy, only individuals are allowed to file for bankruptcy, and this also includes sole proprietors of a business, which means only one owner of a business.

Eligibility Restrictions

In chapter 7 bankruptcy, the disposable income of the individual or business must be low enough for them to pass the chapter 7 bankruptcy test. While in chapter 13 bankruptcy, the individual or sole proprietor cannot have more than 400,000 dollars of unsecured debt or 1,000,000 dollars of secured debt. However, this value of secured and unsecured debt changes depending on the economy, meaning it may not be the same every year and must be looked into.

When Does Discharge Occur?

For chapter 7 bankruptcy it can take anywhere from three months to five months. While in chapter 13, bankruptcy can take three to five years or will last until all of the planned payments are made.

Property Process in Bankruptcy

In chapter 7 bankruptcy the trustee is allowed to sell or even nonexempt the property of the debtor, to pay off all the creditors. In chapter 13 bankruptcy, the debtor is allowed to keep all of their property, but they will have to pay unsecured creditors an amount that is equal to the value of all the nonexempt assets.

Benefits Gained

In chapter 7 bankruptcy, all debtors get to quickly discharge all their debts and start a fresh new life. However, in chapter 13 bankruptcy, all the debtors get to keep their property and get to pay up their mortgage, car, and nondischargeable propriety debt payments.

Conclusion

Depending on what situation one is stuck in, filing for chapter 13 bankruptcy can be a great idea when in debt. If an individual desperately wants to keep a hold of their property due to sentimental reasons, then they are allowed to do so, which can be better than selling off everything they have.