Bankruptcy is a big decision. It’s an option that can give you a reset to your financial situation, but it can also have a negative impact on your credit and finances in the future. If you decide to file bankruptcy, it’s important to understand that this legal process can be quite complicated, which is why it’s helpful to have the assistance of an experienced bankruptcy attorney.
Not only do you need to decide whether bankruptcy is right for you, but you’ll also need to choose the ideal type of bankruptcy: Chapter 7 or Chapter 13, which will determine which sections of the bankruptcy code are used to handle your debt. Here’s an overview so you can learn more about the differences between these two types of bankruptcy:
Chapter 7 vs Chapter 13: How Bankruptcy is Handled
The main difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy is the way property is handled in the proceedings.
Chapter 7 Bankruptcy: This type of bankruptcy is known as “liquidation.” In order to pay off your debts, some or all of your assets/property are sold to come up with the cash. If you have a limited income or you don’t own a home, then it’s common to choose Chapter 7. Both individuals and business entities can file Chapter 7 bankruptcy.
Chapter 13 Bankruptcy: This type of bankruptcy is known as “reorganization.” The main benefit of Chapter 13 is the chance that you might be able to keep your property (such as your car or home). The bankruptcy process involves a court-mandated payment plan, usually lasting between 3 – 5 years. Only individuals (not business entities) can file Chapter 13 bankruptcy.
Regardless of the type of bankruptcy you file, there might be exemptions to the filing process. For example, you might be able to keep certain assets, such as retirement accounts, home equity, or valuable personal possessions (such as jewelry). All other assets are sold so that your debts can be paid.
Legal Help for Your Bankruptcy
If you can’t see a way out of your financial situation, then it might make sense to file for bankruptcy. Before you move forward with these proceedings, it’s essential to talk to an experienced attorney about your options. Miles & Hatcher, LLP is here to help with your bankruptcy. Call for your free consultation to learn more: (909) 481-4080.