Differences Between Chapter 7 and Chapter 13 Bankruptcy

By Abraham Avotina

When you fall on hard financial times, you may be turning to judicial solutions to get you a fresh start. One big issue is determining what options are out there, and what suits your unique situation. You have heard of Chapter 7 or Chapter 13 bankruptcy, but may not understand the distinctions between the two. These two processes are very different and can greatly affect which of your assets get taken away and how much of your debts really get discharged or erased at the conclusion of the proceeding.

Chapter 7 is where a court discharges most of the debts you own. In exchange, you will likely lose any property that is not exempt from the collection. These include any property that is not equity in your home, insurance, retirement plans, personal property, public benefits, and tools that you use on the job. Exemption from home equity is also known as homestead exemption. This exclusion allows you to exempt up to $22,975 of the equity under the federal code. You have to be careful to see what applies in your local rules because some states do not allow for this exemption. Some other state jurisdictions are even more favorable and allow for the protection of all or most of the equity of an individual's home. Personal property includes furniture, home goods, clothing, appliances, and books. There is a limitation of how much jewelry you will be able to keep. Public benefits can include Social security payments, unemployment benefits, and welfare. You also may be able to keep money and resources that you use as part of your trade or profession.

Chapter 13 bankruptcy is where the individual filer can get a repayment plan to pay back parts of all of the debt over time. There are various factors that are considered in this repayment plan including the earning of the individual, the types of debts owed, and the amount of property owned. The nice thing about Chapter 13 bankruptcy is that you don't lose property. You will usually have to pay back all or a portion of your debts over a three to five year period. While the idea of not losing your property is nice, there are drawbacks. First, not everyone is eligible for Chapter 13 bankruptcy. A candidate must have some sort of income that is regular, a manageable total debt burden, and limited secured debt. Candidates also have to go through credit counseling and pay the fees associated with these processes.

Restructuring and discharging your debt can be highly complex and confusing. Before you decide on whether to go through with Chapter 7 or Chapter 13 bankruptcy, explore what you are capable of and what you are willing to part with.

There are professionals who can help when it comes to chapter 13 bankruptcy Birmingham. Make sure that the person you talk to is knowledgeable and devoted to helping you get your live in order, and visit http://brentwdavis.com.

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