Based in Utah, bankruptcy attorney Ryan E. Simpson is part of a legal practice devoted to guiding individuals and families through bankruptcy, from assessing finances to rebuilding credit. Both Chapter 7 and Chapter 13 bankruptcy work to ease the stress of overwhelming debt; however, to emerge from the bankruptcy process in the best financial position possible, it is important to choose the type of bankruptcy proceeding that fits your unique circumstances. Take a look at the following information comparing Chapter 7 and Chapter 13, and then contact Ryan E. Simpson for a free initial consultation. We can help you obtain relief now and financial stability in the future.
Which Type of Bankruptcy is Right for Me?
Chapter 7 and Chapter 13 both offer benefits to the overburdened consumer; however the proceedings differ in many ways, beginning with eligibility. Chapter 7 is usually only available to people who have very little or no disposable income, and thus, cannot afford to repay their debts. For people who can afford to pay something to their creditors, as opposed to nothing as in a Chapter 7, Chapter 13 may provide the necessary relief. Filers under Chapter 13 are entitled to “Individual Debt Adjustment,” which is essentially a repayment plan. With the repayment plan, unsecured debt is not discharged as with Chapter 7, but a Chapter 13 debtor only needs to pay unsecured creditors what he or she can afford to pay. This is why you need a bankruptcy attorney. Learn more at http://markalexander.over-blog.com
The Means Test
In order to file under Chapter 7, the debtor must pass the “means test.” People earning more than Utah’s median income will have difficulty being eligible for Chapter 7. Under Chapter 13, the debtor does not have to pass the means test; rather, he or she must fall within preset limits for secured and unsecured debts. The limits are updated periodically, and we will tell you the exact current limits.
Types of Debt
If most of your debt is unsecured debt, such as credit card bills, medical bills, and loans that are not backed by collateral, Chapter 7 may be a good option for you. Chapter 7 eliminates–or discharges–most unsecured debt. Therefore, a Chapter 7 debtor emerges from bankruptcy basically debt-free compared to the Chapter 13 debtor who must make payments on all debts. Also, Chapter 7 cases are faster and easier to conclude than Chapter 13, and the process itself is over sooner. However, keep in mind that some debts are not dischargeable under Chapter 7, including certain student loans, support obligations, and taxes. A bankruptcy attorney like Ryan E. Simpson can help you.
If you have a steady income from which to make payments on your debts, Chapter 13 bankruptcy may be a better fit than Chapter 7, especially if you have property to protect. In fact, depending on individual circumstances, Chapter 13 debt adjustment offers many advantages over Chapter 7 liquidation, even though it does not eliminate a large amount of debt the way a Chapter 7 can. For example, Chapter 13 is an invaluable tool to help homeowners stay in their homes. The debt adjustment plan can be used to repay arrears owed on a mortgage over the life of a plan. Because mortgage companies will usually only allow a very short repayment–about four to six months–the 60 months afforded by Chapter 13 can truly be a lifesaver.
If you have a lot of tax debt, Chapter 13 may be the best option for you because Chapter 13 can be used to repay tax debt that is not dischargeable in a Chapter 7. Chapter 7 will eliminate income tax debt that was due more than three years before filing for bankruptcy; however, all other tax debt will not be discharged. With Chapter 13, the debtor is able to repay that amount over five years, greatly easing the burden of substantial tax debt. Call Utah bankruptcy attorney Ryan E. Simpson for a free consultation.