Is Chapter 13 or Chapter 7 The Better Choice? | Paducah, KY

Is Chapter 13 or Chapter 7 The Better Choice?

bankruptcy chapter 7 vs 13

bankruptcy chapter 7 vs 13

We all know that filing a bankruptcy petition brings stress, fear, and anxiety. There are various considerations when facing the decision to secure your assets under chapter 7 discharge (eliminating all debts) or to seek relief under chapter 13 (paying back your debts over 3-5 years). Such life-changing decisions are better made when equipped with the correct information that may only be provided by a legal professional with competence in the field of bankruptcy.  Let our experienced Paducah bankruptcy attorneys at Farmer & Wright, PLLC help you. 

 

The difference between chapter 7 and chapter 13 bankruptcy

Chapter 7 bankruptcy, also called liquidation bankruptcy can wipe out all unsecured debt and high-value assets.

However, certain assets are exempt from bankruptcy. Property loss is always a possibility in Chapter 7 bankruptcy, so knowing the bankruptcy exemptions is critical.

While Chapter 7 bankruptcy takes between 90 and 120 days to complete, Chapter 13 bankruptcy takes three and five years.

Bankruptcy under Chapter 13 is a reorganization of your existing debt. You can use the bankruptcy forms to create a debt repayment plan estimate for your Chapter 13 bankruptcy.

Most Chapter 13 plans are five years in length. However, if your monthly income falls below the median income guideline for Chapter 7 and you file a Chapter 13 bankruptcy, you may qualify for a three-year payment plan.

 

Risks of filing Bankruptcy Chapter 13

  • Chapter 13 has a much higher failure rate than chapter 7.
  • Exorbitant fees and costs
  • It may affect your financial situation.
  • If your bankruptcy is unsuccessful, you risk losing your home and other valuable property.
  • Due to failure, budgeting skills are harmed.

 

Risks of filing Chapter 7 Bankruptcy Cases

  • If you earn an excessive amount of money, you cannot file Chapter 7.
  • It does not eliminate all unsecured debts.
  • Certain types of property are susceptible to loss.
  • Your Chapter 7 bankruptcy filing does not protect others.

If you have excellent credit, it is almost certain that you will experience a minor setback.

Learn How to Prepare for Bankruptcy in Kentucky.

 

How to be a good candidate for chapter 7

Chapter 7 bankruptcy is a fresh start. It can help you rebuild your credit and get rid of debt. But it’s not an easy process. 

Here are some steps for making the most of it.

Not everybody fits for Chapter 7 debt relief. To determine if you qualify for Chapter 7 bankruptcy, you must pass the Means Test for the region in which you live.

Suppose you previously filed a Chapter 7 case but did not complete it and won’t receive a discharge. In that case, you may file a new Chapter 7 case at any time, provided the bankruptcy court in the previous trial did not specifically prohibit you from filing again.

Lastly, six (6) months before filing for bankruptcy, you must complete a prebankruptcy credit counseling course conducted by approved credit counseling agencies. Once the mentoring is perfect, you will receive a certificate that you must file as an exhibit with the bankruptcy court.

Upon filing your bankruptcy petition, you will also be required to complete a debtor’s education course, which is designed to promote sound financial practices following your temporary setback.

 

How to be a good candidate for chapter 13

Chapter 13 bankruptcy is a category of bankruptcy that is designed for debtors who do not qualify for a Chapter 7 debt discharge due to a lack of means. It may be appropriate for you if you meet the following criteria:

  • Possess a stable job that provides a steady income
  • Possess significant assets
  • Can meet ongoing financial responsibilities such as utility bills, alimony, and child support

You are unfit to file for Chapter 13 bankruptcy if any of the following apply:

  • You acquit yourself of the Chapter 7 means test.
  • Your debt is greater than the Chapter 13 debt ceiling.
  • You have not filed a federal income tax return in the last four years.
  • Your profession is that of a stockbroker or commodities broker.
  • Your prior bankruptcy case was dismissed within the last 180 days.

Some of these situations are resolvable, while others are not. Our Farmer & Wright, PLLC law firm, can explain your debt relief options and assist you in implementing a debt relief strategy. Schedule a free legal consultation now!

 

Paducah Bankruptcy Attorney Final Thoughts

So, as you can see, determining which bankruptcy option is crucial to someone facing a financial crisis. There are many factors to consider, which is why we recommend working with a bankruptcy attorney.

It is up to you whether or not you want to get the services of a legal professional, but whatever you decide will greatly impact how well your bankruptcy case goes. The first step should always be consulting a knowledgeable and trustworthy bankruptcy lawyer in Paducah. They have the experience you need to help guide you through the process so you can decide which option is best for you. Schedule a free consultation with us now so we can get started on your journey to financial freedom.

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