Basics of Chapter 13 and Chapter 7 Bankruptcy

Filing for bankruptcy has always transported a certain stigma with it. Today, it still carries an air of negative view around it. Filing for bankruptcy can be muddled if the debtor files without the help of an attorney. Filing without an attorney is strongly discouraged because bankruptcy has long-term economic and legal consequences, which must be taken into account when drawing up the paperwork. The bankruptcy procedure is the same whether under chapter 7 or chapter 13, but the results are not the same. This article will guide debtors through the process of filing for bankruptcy.

Chapter 7

In terms of documentation, there is no difference between chapter 13 and chapter 7 requirements. In either case, the debtor should file a petition stating their inability to repay their lenders. The bankruptcy court will also require the debtor to file schedules of belongings and liabilities, salary and expenses, any open documents or leases and a statement of financial affairs. Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 needs all debtors filing for chapter 7 to attend credit counseling at least 180 days before filing, the debtor should also present a certificate of credit counseling to the court when filing. If the debtor has mostly consumer debt such as credit card debt, they must also file documents stating any salary received from employers in the last sixty days, any interest the debtor has in qualified state or federal tuition accounts, a statement of monthly net income and any expected increases in income or costs post-filing, and a copy of any debt repayment plan that was developed during credit counseling. If the debtor is married, their spouse should also provide the documentation even if only one of them is filing. Twenty to forty days after filing, the meeting of creditors will happen. The bankruptcy trustee will place the debtor under oath and both the trustee and the creditors will ask the debtor questions to verify their economic status. After this meeting, if none of the lenders object, the bankruptcy court will issue a discharge relieving the debtor of the liability to repay their debts.

Chapter 13

If the debtor has the ability to repay their creditors and they're faced with foreclosure of their house, they should file for chapter 13 instead of chapter 7 because this chapter permits them to save their home and even completely repay their delinquent mortgage over time. Chapter 13 allows the debtor to set up a repayment plan that the creditors are forced to agree to by court order. The debtor should present the plan to the bankruptcy court in question and make it succeed once it's confirmed. It's on the debtor's shoulders to follow their repayment plan. Depending on the severity of their debts, this repayment plan can extend for up to five years. Even after the repayment plan is finished, the bankruptcy stays on their credit record for up to 7 years.

Conclusion

Filing for bankruptcy is easy and painless if finished correctly and with the appropriate direction.