Which Is Better, Chapter 7 Or Chapter 13?
Both major kinds of consumer bankruptcy are designed to give distressed debtors, like you, a fresh start in life. Stopping creditor harassment, up to and including foreclosure or repossession, protecting assets, and discharging (forgiving) debts are the three cornerstones of this fresh start. As outlined below, neither chapter is “better” than the other one. They are simply designed to help different families in different situations.
A Chicago bankruptcy lawyer does much more than fill out the right forms. An attorney evaluates your financial situation and gives you solid advice about your options. When it comes to submitting legal paperwork, a lawyer does more than fill in the blanks. An attorney helps you complete the paperwork strategically and maximize your fresh start. Finally, when the case goes to court, you don’t have to face off against creditors’ lawyers, or a hostile trustee (person who manages a bankruptcy for a judge) on your own.
Chapter 7
Mostly through no fault of their own, many families struggle with high medical bills, credit card bills, and other unsecured debts.
Typically, injury or illness strikes without warning. Even if the family has health insurance, 20 percent of something like a cancer treatment bill is an awful lot of money. As for credit cards, most people use plastic when their cash flow dries up, for one reason or another. Credit card interest is usually about 18 percent. At that rate, this approach isn’t sustainable for more than a few months.
Chapter 7 eliminates these unsecured debts, and others like them, in as little as six months. About six weeks after debtors file their petitions and schedules, they meet with the trustee. The trustee reviews some financial documents, like tax returns, verifies the debtor’s identity, and deals with any red flags of bankruptcy fraud or other issues. Assuming there are no serious problems at this 341 meeting, the judge quickly closes the case.
A Chicago bankruptcy lawyer is a great asset throughout this process. The mere presence of a lawyer often causes even the most aggressive trustees and creditors to back off.
Chapter 13
Illinois, like most jurisdictions, is a non-judicial foreclosure state. Legally, banks may begin the home foreclosure process after just one missed payment. Furthermore, banks don’t need court orders to seize personal residences in the Hoosier State.
As mentioned, Chapter 13 stops the foreclosure process. But there’s more. Chapter 13 gives families up to five years to erase past-due mortgage payments, and other secured debt delinquencies, on their own terms.
At the aforementioned 341 meeting, the trustee helps the debtor set up an income-based repayment plan. As long as the plan meets minimum legal requirements, creditors usually cannot successfully challenge the payment arrangement in court. Since the Automatic Stay remains in place, at least in most cases, creditors cannot pressure debtors to pay more money or pay it faster.
When the protected repayment period ends, the judge normally discharges (forgives) any remaining unsecured debt. With a zero past-due balance on secured debts and no crushing unsecured debts, families can make the most of their fresh financial starts.
Rely on Dedicated Cook County Lawyers
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC.
Resource:
law.cornell.edu/supct/pdf/05-996P.ZO
