As you consider filing bankruptcy, you should learn the difference between Chapter 7 and Chapter 13 bankruptcies. There are some advantages of filing Chapter 13 Bankruptcy vs. Chapter 7 Bankruptcy. In a Chapter 7 bankruptcy, most of your debts are wiped out; in exchange, you must relinquish any property that isn’t exempt from confiscation by your creditors. In a Chapter 13 bankruptcy, sometimes called reorganization bankruptcy, you don’t have to surrender any property, but you must use your income to pay some or all of what you owe to your creditors (typically over 3-5 years). The amount of repayment could range from 10% to 100% depending on the debtor’s income and aggregate of the amount owed.
Chapter 13 bankruptcy is the reorganization of an individual’s debt with a new payment plan. Your payments will be made to a Trustee who will disburse them in a manner called for in the court-approved arrangement. During this time the Trustee will have control over your personal finances. All credit-related matters will have to be cleared through him. Individuals will have no direct contact with their creditors while under Chapter 13 protection.
If you have too much disposable income to qualify for chapter 7 or have assets you want to protect, you may want to consider this code. Your debts must be below a certain level and you must have steady income.
A bankruptcy attorney can help you sort through this complicated process and advise you on the best path for your personal situation.
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