Advantages of A Type 13 Bankruptcy Filing

By: David Hoyer

Many people facing a dire financial situation ask themselves if they should file for bankruptcy or try to tough it out. The answer is not easy when you are buried under a great deal of debt with seemingly no other way to get out of it. If you file, the repercussions will be with you for years. So, before filing, it is best to know exactly what are the advantages and disadvantages.

Basically, as an individual, you can file for two types of bankruptcy that you can file - 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 have too many assets to quality. If this case, they may force you to change your Chapter 7 filing to a Chapter 13 filing.

If you are approved for a type 7 bankruptcy, the court will liquidate some of your assets and divide the money collected from them among your creditors. Most of your remaining debts will be discharged. In most cases, you will be allowed to retain your primary home, your car, and much of the other items that you need to live.

If you have luxury items, however, they will normally be among the first to be liquidated and the proceeds used to pay your creditors. Absent any surprise circumstances, in most cases the entire process will be completed in six months or less.

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://articles-book.com

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

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