Chapter 7 Bankruptcy
The Advantages of Filing for Chapter 7 Instead of Chapter 13 Bankruptcy
When a person considers filing for chapter 7 bankruptcy, it's essential to understand which secured and unsecured debts are covered and which are not. Secured debts are those in which default can result in seizure or non-release of the property the loan was connected with. That could be a house, a car or collateral left at a pawn shop. Unsecured debts do not have any property connected with them. Examples include credit cards, installment loans, medical bills and student loans.
Dissolution of Assets
Filing for chapter 7 bankruptcy requires a certain amount of the person's assets to be dissolved to pay off creditors as much as possible. Some assets are protected, though. The person's primary vehicle can be kept in his or her possession as long as it is not worth more than an amount specified by law.
Exceptions to Debt Erasure
After that process is complete, the remainder of the debt is wiped clean, although there are certain exceptions.
Student loans cannot be discharged in bankruptcy, and neither can back or future child support payments. The same is true with spousal support payments and a certain amount of income tax.
Advantages of Chapter 7 Compared With Chapter 13
Filing chapter 13 is another option for individuals. However, there are distinct advantages to the chapter 7 filing with the assistance of a bankruptcy attorney.
With chapter 13, the person sets up a repayment schedule monitored by a trustee who distributes the payments each month. This is a long process, generally lasting from three to five years. Unless the individual has a substantial increase in income, the budget will be very tight over those upcoming years. In contrast, the other option is speedy. Normally, it takes only about three months at most.
This filing, as arranged with an organization such as John Henderson Law, truly is a fresh start. Because the person is not facing years of repayments on credit cards and personal loans. If the person had a large amount of unpaid medical expenses, that also is eliminated. A substantial amount of medical expense is a common reason that people file for bankruptcy protection. Even when they have health insurance, the deductible and co-pay amounts, along with expenses that aren't covered, can add up to an enormous sum.
With this clean slate, the burden of paying out hundreds of dollars each month on back debts is gone. The relief the person experiences can be considered a significant mental health benefit, as it eases the stress that has been ongoing for a long time.