One of the most common questions asked when it comes to filing for bankruptcy is what type of bankruptcy is the right one to file. By far the most frequent type of bankruptcy for individuals is Chapter 7 and Chapter 13. There are distinct differences between the two different types of bankruptcies.
Chapter 7 bankruptcy is called a liquidation type of bankruptcy. Chapter 13 is called a reorganization type of bankruptcy. A liquidation bankruptcy is where all of a person’s non exempt assets are liquidated, and the proceeds are then paid to the debt holders. A person is left with basically nothing but they walk away debt free. On the other hand, a reorganization bankruptcy is where a person, with the help of a Chapter 13 attorney in Mechanicsburg, comes up with a repayment plan to get all debts paid off.
Restrictions
Now there are some restrictions for each of the different types of bankruptcies. For starters, a Chapter 7 bankruptcy is available for both individuals and businesses while a Chapter 13 bankruptcy is only available to individuals. Additionally, Chapter 7 bankruptcy has a ceiling for amount of disposable income while a Chapter 13 bankruptcy has a maximum amount of allowed debt.
The amount of time until discharge (where the bankruptcy is finalized) is also very different. For a Chapter 7 bankruptcy, the amount of time until bankruptcy discharge is typically three to five months. For a Chapter 13 bankruptcy, the amount of time until discharge can be three to five years.
There is an advantage that a Chapter 13 bankruptcy has over a Chapter 7 bankruptcy. For a Chapter 7 bankruptcy, a person loses virtually all of their assets. On the other hand, a Chapter 13 bankruptcy allows a person to keep all of their assets so long as their repayment plan is adequate enough to pay off the debts in a timely manner.
One other huge advantage that a Chapter 13 bankruptcy has over a Chapter 7 bankruptcy is the possibility of being able to lower the principal owed. Most debt holders want to get as much of their money as soon as possible. They are sometimes willing to take a lesser payment in order to close out the account sooner. It is expensive on their part to keep an account like this open, so that is the reason why they might be willing to lower the principle. This option is not available for a Chapter 7 bankruptcy.
Each bankruptcy case is different. Sometimes, a Chapter 7 bankruptcy is better, and other times a Chapter 13 bankruptcy is better. A Chapter 13 bankruptcy can be more complicated. That means that hiring a Chapter 13 attorney in Mechanicsburg might be needed.
John M Hyams is a chapter 13 attorney Mechanicsburg, Harrisburg, Hummelstown and the surrounding areas. He caters to both personal and business bankruptcy. The areas that John M Hyams practices include Chapter 7, Chapter 11 and Chapter 13 bankruptcies as well as business law, debtor and creditor law and real estate.
