Debt Relief Through Chapter 7 (Liquidation) Bankruptcy
Individuals and families may find themselves deep in debt for a variety of reasons - from job loss to medical emergencies. If you are struggling to stay on top of your bills and want to seek financial relief, you may want to consider filing for bankruptcy. It is a common myth that filing for bankruptcy is the end of the line when it is actually a chance for a new beginning and a fresh financial start.
Chapter 7 bankruptcy is one of the most common forms of bankruptcy. Known as the liquidation option, Chapter 7 is appropriate for individuals who do not have sufficient disposable income to pay back debt. In almost all filed Chapter 7 cases, the debtor (you) does not surrender or lose any assets by filing a Chapter 7.
There are many benefits of filing for Chapter 7, including:
Stops foreclosure and repossession
Stops wage garnishment and collection attempts
Does not have minimum income requirements
Forgiveness of all or most of unsecured debts
Requirements of Filing for Chapter 7
Not everyone can qualify for Chapter 7, which is why it is important to meet with a Bankruptcy attorney to discuss your options. You will need to take a means test to determine that your income is less than the median of households of the same size in your district.
The Chapter 7 Process takes approximately 4-5 months. You will be required to meet with a Trustee and answer a few questions (with your Attorney) and afterwards, almost all cases end up with a Discharge in Bankruptcy (forgiveness of your debt) and a FRESH FINANCIAL START.
Chapter 13 Bankruptcy
Under a chapter 13 bankruptcy, you propose a 3 or 5 year repayment plan to the creditors. In the vast majority of cases, you pay a small portion of what you owe in full satisfaction of all of your unsecured debts (depending on your disposable income).
You can use Chapter 13 to prevent a house foreclosure, make up any missed car or mortgage payments and pay back certain taxes. Many chapter 13 cases are filed due to arrears on mortgage debt. In many filed cases (including Ch. 13 cases in New York) people file a Chapter 13 to receive a discharge along with a mortgage modification request.
If you can stay current on your trustee payments, all your remaining dischargeable debt will be forgiven at the end of the plan (typically three to five years). The amount to be repaid is determined by several factors including the debtor*s disposable income.
to file a Chapter 13 bankruptcy, you must have a *regular source of income* and have some disposable income to apply towards your Chapter 13 payment plan. In New York (SDNY), you can use a family member's income if that family member signs an affidavit attesting to his/her contribution to household expenses.
Chapter 13 bankruptcy is generally used by debtors who want to keep secured assets, such as a home or car, when they have more equity in the secured assets than they can protect with their New York bankruptcy exemptions. Chapter 13 bankruptcy is a reorganization whereas Chapter 7 bankruptcy is a liquidation.
When a debtor has valuable nonexempt property and wants to keep it, a chapter 13 may be a better option (as compared to a Chapter 7). However, for the vast majority of individuals who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice.
In addition to helping with mortgage arrears and a chance to modify a mortgage that is not affordable, a Chapter 13 Case can also:
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