Chapter 7 Bankruptcy has many advantages for those in debt, and this article will debunk many myths the media uses to exploit those who file. When Americans in debt are provided the choice of filing Chapter 7 (discharge/erase most debt) or Chapter 13 (3-5 year repayment plan), many debtors prefer filing Chapter 7 Bankruptcy. However, a debtor must qualify by meeting an income limitation, and have limited assets. Not everyone will lose property such as their motor vehicle, which is a big misconception. This will depend on the equity of the vehicle, loan balance (if any), and the value of other assets. There is a certain amount of assets the law allows an individual to keep.
The debtor receives a “fresh start”.
The goal of filing a bankruptcy petition is to give the debtor a new, fresh start. Once the petition is filed the phone will stop ringing, and you can finally begin to relax. Though the debt isn’t eliminated until the actual discharge date, creditors cannot harass or attempt to collect any debt once the petition is filed. Keep in mind there are several debts not dischargeable under bankruptcy law, including: student loans (unless the court rules otherwise), child support, alimony, and some taxes.
The debtor keeps future income.
Property a debtor receives or will receive after filing for Chapter 7 is not included in the bankruptcy petition or estate. Although, property from a divorce, civil settlement, or inherited property a debtor acquires within 180 days after filing for Chapter 7 (not after discharge) will become part of the bankruptcy estate.
No maximum debt amounts.
Chapter 7 Bankruptcy laws and rules do not impose a limit on the amount of debt a filer may have. However, when filing Chapter 13 Bankruptcy, a debtor is ineligible and the court will request you to file under Chapter 7 if secured or unsecured debt exceeds debt limits.
No repayment plan.
The debtor is no longer responsible for repaying the debt after its discharge in Chapter 7. Once the Chapter 7 Bankruptcy Petition is filed you’re not required or allowed to pay creditors any money you owe them.
The discharge of debts occurs quickly.
In a typical Chapter 7 case, the discharge of debt occurs within 60 – 90 days. Debtors should expect the court to issue a discharge order and close the case 60 to 90 days after filing the initial petition.
The Disadvantages of Chapter 13 Bankruptcy
Only individual debtors are eligible to file Chapter 13, not businesses.
Chapter 13 cannot be utilized if you’re a business owner, regardless of ow large or small the business is. However, if you have incurred personal liability for business debts, you can file as an individual only.
The debtor must repay all creditors under Chapter 13.
A debtor who files Chapter 13 Bankruptcy is required to repay creditors using a 3-5 year repayment plan. Furthermore, the debtor must have sufficient income to pay creditors every month in addition to their future monthly bills. The payment plan consolidates the debt so the payments are manageable. The debtor must repay priority debts (such as taxes) and secured creditors in full, and repay unsecured creditors (credit card debt) in an amount equal to what those creditors would have received if the trustee had sold the debtor’s nonexempt property in a Chapter 7 Bankruptcy.
Before Filing for Chapter 7 Bankruptcy, Have VAP Bankruptcy Preparer Experts Review Your Situation for Free
Consider getting a free Chapter 7 Bankruptcy evaluation from our VAP Bankruptcy Preparer Experts, by calling 1-203-519-0599.