Chapter 7 and 13 Bankruptcy

Chapter 7 and 13 Bankruptcy "There are at least five types of bankruptcy, but only two are significant to the average person. The chapters are 7 and 13.Chapter 7 is for those with a substantial amount of debt. Perhaps the individual owes $100,000 in credit card debt or has enormous medical expenses. In either case, this individual (and possibly their spouse) may wish to file for Chapter 7 bankruptcy protection. Chapter 7 bankruptcy allows a person to receive a complete discharge of all of his or her debts, presuming that all of the necessary requirements are met. It is essential to note that a qualified local attorney must review the case to ensure that the individual qualifies for a chapter 7 bankruptcy. In addition, certain debts are never dischargeable, such as student loans, the majority of IRS debts, alimony (maintenance), child support, and criminal violations. Fortunately, the majority of debts are dischargeable, or can be eliminated.What if a person is far behind on their mortgage payments? To save his or her residence, one can file Chapter 13 bankruptcy. This is when the bankruptcy court grants a debtor a period of time, typically five years, to catch up on mortgage arrears. Additionally, the client's credit card debt can be included in the 5-year ""plan"" to enable for a gradual repayment of that debt. Therefore, if a person owes their mortgage lender, say, $50,000 in arrears, they would be required to pay an additional $850-$900 per month for five years (on top of their regular mortgage payment). Consequently, a Chapter 13 is essentially a reorganization for an individual (whereas Chapter 11 is typically for businesses, assisting them in remaining in business and paying off debts according to a court-approved plan). One of the most important features of Chapter 13 is that arrears are paid off over 5 years with 0% interest. That is very important.In conclusion, Chapter 7 can provide those who qualify with an opportunity to start over by eliminating nearly all debts. Chapter 13 is for those who need to regain control of their debts, typically mortgage arrears, and pay them off gradually. This procedure can often save a homeowner's residence. How an individual qualifies for Chapter 7 and/or Chapter 13 is discussed in other articles.
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