Should I File Chapter 7 or Chapter 13?
The answer to this question usually depends on the kinds of debts you have. Some people have issues with unsecured debts, like credit cards. The average credit card interest rate is over 20 percent, so the balance shoots up quickly. Other people have issues with delinquent unsecured debt, like past-due auto loan payments. Legally, the bank can repossess an automobile after one missed payment.
As outlined below, Chapter 7 is usually the best way to address issues with unsecured debts. People who’re facing repossession or foreclosure usually filed Chapter 13. All debtors need a Chicago bankruptcy lawyer to maximize their fresh starts. All debtors should also partner with a lawyer quickly. Generally, adverse actions, like repossession, are relatively easy to prevent, if the debtor files bankruptcy. However, these adverse actions are almost impossible to undo.
Chapter 7 Basics
Most people qualify for Chapter 7 bankruptcy, if their income is below the average figure for that geographic area. If your income is on the borderline, a Chicago bankruptcy lawyer can use other methods, like income/expense ratio, to meet this standard. If your income is substantially above average, then quite frankly, you probably don’t need to file Chapter 7. Other solutions are available.
As soon as debtors file their voluntary petitions, bankruptcy’s Automatic Stay stops all creditor adverse actions, including:
- Foreclosures,
- Repossession,
- Wage garnishment,
- Creditor lawsuits, and
- Creditor harassment.
Section 362 of the Bankruptcy Code also applies in Chapter 13 bankruptcies. Usually, the Automatic Stay remains in effect until the judge closes the matter.
The trustee (person who oversees the bankruptcy for the judge) will liquidate all the debtor’s nonexempt property to pay debts. However, most people don’t have nonexempt property. The listed exemptions include:
- Home equity,
- Retirement account,
- Vehicle equity,
- Personal property], and
- Government benefits.
Informal exemptions, such as the best interests of creditors rule, are available as well. If Max has a beat-up fishing boat, the cost of seizing, repairing, and selling the boat might outweigh the sale proceeds. If that’s the case, his fishing boat is untouchable.
Chapter 13 Basics
Chapter 7 has an income requirement, and Chapter 13 has a debt ceiling. Usually, people cannot file Chapter 13 unless they have less than $2.4 million in secured debts and $400,000 in unsecured debts. Quite frankly, if you’re considering bankruptcy, your debt load is probably close to these figures.
Some other minor qualifications apply in both kinds of consumer bankruptcy, like completion of a pre-filing debt counseling class.
Chapter 7 immediately discharges unsecured debts, and Chapter 13 gives debtors up to five years to repay allowed claims. Usually, allowed claims include secured debt arrearage and past-due priority unsecured debt payments. PUDs include student loans and back taxes.
If the repayment plan meets minimum standards, the judge typically approves it without holding a hearing. If the monthly debt consolidation payment becomes unmanageable, a Chicago bankruptcy lawyer can ask the judge to modify the payment.
Furthermore, Chapter 13 can unilaterally convert to Chapter 7 at almost any time. That conversion means no more monthly payments and a quicker fresh start.
Work With a Diligent Cook County Lawyer
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced back taxes lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.
Source:
autotrader.com/car-tips/car-repossession-how-many-missed-payments
