Bankruptcy offers solutions to financial stress, but there are different paths that you can take. Both Chapter 7 bankruptcy and Chapter 13 bankruptcy might offer solutions to help get you back on your feet, but which one is right for you?
Chapter 7
Chapter 7 bankruptcy, also known as liquidation, allows a debtor to get rid of most of their debts and start over with a clean slate. A debtor must first turn over all their assets to a trustee, whose job it is to liquidate the assets for the benefit of creditors. However, most consumer Chapter 7 bankruptcies are determined to be “no asset,” so it usually does not result in the loss of any assets. Rather, the debtor simply receives a discharge of most of their unsecured debt. Due to its sweeping relief, Chapter 7 is only available to debtors with little or no disposable income; it is mostly geared for people who cannot realistically afford to repay their debts.
Chapter 13
For those people who can afford to pay something to their creditors, Chapter 13 can provide relief. Chapter 13 bankruptcy, known as reorganization bankruptcy, essentially amounts to a repayment plan to gradually eliminate most debts. Unlike credit counseling repayment plans, no negotiation is required and no interest is charged.
Chapter 13 is an invaluable tool to help homeowners stay in their homes. They can repay arrears owed on a mortgage over the life of the plan, and because mortgage companies usually only allow a very short repayment plan (4-6 months), the months afforded can be a lifesaver. Chapter 13 can also be used to repay tax debt that is not dischargeable in a Chapter 7. Of course, in every Chapter 13, the debtor must be able to afford the monthly payment, which can be difficult to do when the situation is dire.
If you are having difficulty with your debts and are considering bankruptcy, please contact our Altamonte Springs bankruptcy lawyer at the Law Office of Russell S. Hershkowitz, L.L.C. We provide effective and insightful legal counsel and can help guide you through the tough & complex bankruptcy process.
Call (407) 753-4111 or contact us online to set up a free consultation.