Why File A Chapter 13 Bankruptcy?

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Should I file for bankruptcy or should I try to make a go of it? This is one of the basic questions that many people ask themselves as they attempt to crawl out from under a mountain of debt that they have accumulated. Filing for bankruptcy is not a decision to make lightly. Before filing, it is best to know what the advantages and disadvantages are.

When it comes to individuals filing for bankruptcy, the two primary types of filings are Chapter 7 and Chapter 13.

Under Chapter 7, you are essentially allowed to retain the majority of your assets. This is, in fact, what most people envision when someone mentions bankruptcy to them. When you file Chapter 7, you have to report all of our assets, income, debts, and expenses to the court through the bankruptcy trustee. First, the court decides, based on your income and expenses, whether you are eligible to file for Chapter 7. You have to first pass a means test. Then, if you qualify, you will be given the ok for a Chapter 7 filing.

As a matter of fact, in a few cases, when you file for a Chapter 7 bankruptcy, the courts may decide that either you earn too much money to qualify or you possess too many assets to quality. In this case, they may require that you to modify your Chapter 7 filing to a Chapter 13 filing.

Assuming that you're approved to file a Chapter 7 bankruptcy, the court will direct the bankruptcy trustee to liquidate your non-exempt assets and allocate the money collected from them to the various creditors. Any debts remaining after all non-exempt assets are sold will be discharged. In most cases, you will be allowed to keep your primary home, your car, and many other necessary items.

However, luxury items and investment items will usually be among the liquidated items used to pay your creditors. Unless there are unusual circumstances, in most cases the entire process will take place in under 6 months.

Under a Chapter 13 bankruptcy scenario, your debts are not discharged. Rather they are reorganized. The forms that you used to file for type 13 are the same as you use in a type 7 filing. With this plan you will be required to propose a three to five year plan which details how you will repay the debts that you owe.

If the plan seems reasonable, it will most likely be approved. The advantages of this type of filing is that it enables you to keep all of your assets and lets you arrange your bills in a manner that you can pay down without a lot of hardship. The disadvantage, of course, is that you still have to pay off your debts.

It used to be that filing for bankruptcy carried such a stigma that people tried to avoid it at all costs. In recent years, however, the number of bankruptcy filings has grown so much that it no longer carries the same stigma that it once did.

Article Source: http://depositarticles.com/

David Hoyer is a freelance writer who writes articles relating to credit and credit cards after bankruptcy and claiming bankruptcy and other financial issues.

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