Bankruptcy is a way for individuals to help get their financial affairs in order. Although there are a few different types of bankruptcy, individuals may only apply under chapter 13 and chapter 7. If you’re exploring bankruptcy, keep reading to learn some critical distinctions between these two chapters.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is sometimes described as a restructuring or reorganization bankruptcy and does not result in the liquidation of your property. The amount of debt you can discharge is capped at $394,725 of unsecured debt and $1,184,200 of secured debt. Chapter 13 filers usually have a steady income and would like to repay their debts. However, the current structure of their financial obligations is preventing them from making headway in satisfying their creditors. After a successful bankruptcy hearing, debtors will be making pre-determined monthly payments to a trustee for three to five years based on a repayment plan that has been filed and accepted by the court.
Chapter 7 Bankruptcy
Both individuals and business entities can take advantage of Chapter 7 bankruptcy provisions. The result of this type of bankruptcy is liquidation. Those applying are not looking to repay their debts but to do away with them entirely. During the process, a trustee will take an inventory of all the debtor’s assets and sell those that are not exempt. The proceeds will be used to pay creditors. In order to be eligible for chapter 7, the debtor’s income must be less than the state median income, and they undergo a means test, which is an examination of the debtor’s financial situation, including income, expenses, and assets.
Bankruptcy is a complicated process, no matter what chapter you file under, and the decisions (even mistakes) are final. Therefore, when it’s time to pursue a bankruptcy, having a bankruptcy lawyer in Valdosta on your side is highly advisable.