When To File Chapter 7
Chapter 7 bankruptcy can have important advantages over Chapter 13 bankruptcy.
The principal advantage of Chapter 7 bankruptcy is that it is fast, and discharges your dischasrgeable debt without requiring payments over a period of time.
Advantages of Chapter 7 Bankruptcy
A regular Chapter 7 bankruptcy case is opened and closed within three or four months. Once complete the debtor emerges debt-free except for a secured loans on property the debtor wishes to retain and other nondischargeable types of debts such as student loans, recent taxes, and unpaid child support, fines and claims for the debtor's bad conduct.
While it is possible to lose property in a Chapter 7 bankruptcy, most debtors keep all of their property. Bankruptcy law provides the debtor with exemptions (state and federal) which permits the debtor tp keep most necessities. If the debtor has little property to begin with, there is a good probability he or she will be able to keep all their property.
On the other hand, Chapter 13 Bankruptcy requires you to submit a plan to the court outlining a repayment schedule for at least a portion of your debt. Depending on your financial circumstances, these plans will run from 36 to 69 months. If you are unable to complete your payments, a discharge will not be granted.
When To File Chapter 7
However, some people are ineligible to file Chapter 7 bankruptcy. If your income is sufficient to fund a Chapter 13 repayment plan, after subtracting what you'll spend on necessary and reasonable allowed expenses and monthly payments for child support, tax debts, secured debts (such as a mortgage or car loan), and a few other types of debts,you will be required to file a Chapter 13 case. Additionally, if you are in arrears on secured loans, such as mortgages and car loans, you may lose the home or car if you file Chapter 7 bankruptcy. Under a Chapter 13 bankruptcy, debtors can keep the property and include payments on the past due loans under their Chapter 13 plan.
In short, if you have lower income for your family size and do not have significant nonexempt property, Chapter 7 may be the correct solution. If, you have a higher income, nonexempt property and/or loan arrearages you wish to catch up on, consideration should be given to filing a Chapter 13 bankruptcy. Finally, a debtor may be ineligible to file a Chapter 7 bankruptcy because of a previous Chapter 7 filing less than eight years ago. Some of these debtors may still be able to obtain relief under Chapter 13 if their previous Chapter 7 case was filed more that 4 years in the past.
An experienced bankruptcy attorney can review your circumstances and determine if you are eligible for a Chapter 7 bankruptcy, and guide you in your decision as to which type of bankruptcy is best for you. If you would like to have a free consultation with Macomb Legal Services to discuss which option best suits your situation, call (586) 263- 0740, or simply fill out and submit the form in the right side panel of this page.
