Sometimes filling a bankruptcy is sometimes the right solution out of your financial problem. If filing is the path you decide, it is strongly recommended you do your research to find the top bankruptcy lawyers for your situation. You can voluntary file for bankruptcy or your creditors can move to court and ask it to order you bankrupt. There are separate laws that touch on individuals and others on businesses owners that would like to file for bankruptcy. As Bensalem Pennsylvania bankruptcy attorneys advice, chapter 7 allows for liquidation while chapter 13 is the reorganization or wage earners bankruptcy. Here are the highlights and eligibility rules for each of them.
Chapter 7 Bankruptcy
Some common reasons for choosing chapter 7 bankruptcy include; large medical bills, overextended credit for a long period, marital problems and unemployment. Filing for this bankruptcy deals with most of your unsecured debt. You will lose any nonexempt property, as it will be sold to pay your creditors. However, most debtors retain most of their property and all of it in some cases.
You are only eligible for this bankruptcy if your income is less than the median income of the state you live in. You can also be taken through a means test to test your eligibility. Some of the people that earn high income are not eligible in this chapter. You can also temporarily halt the foreclosure process. However, you would be required to get current with your mortgage payments as foreclosure can continue after sometime.
Typically, the bankruptcy case takes about three to four months to conclude and is not as complex as the rest. However, you would be required to fill many papers and go through some tricky legal tests. It is advisable to have a lawyer to take you through the process.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is ideal for individuals that have some property to keep. It allows you to reorganize your debt and pay it off between three to five years. The chapter is also ideal for individuals that have consistent income throughout the year. The law offers them a grace period before the debts are discharged at the agreed period. Once the bankruptcy is approved, creditors must refrain from calling you. You can work as you do pay the debts as agreed.
No property goes to liquidation under this chapter. However, you require a regular monthly income for the monthly payments. There is no income requirement for you to file for bankruptcy on this chapter. However, you must have a secured debt that is not above $1,149,525 and unsecured debt that is below $383,175.
If you are servicing a mortgage loan, you can stop a foreclosure and repay the accrued repayments through your repayment plan. You require an attorney to take you through the creation of a repayment plan for submission to the court during the process.
Other Types of Bankruptcies
The law also envisages Chapter 11 and Chapter 12 bankruptcies designed for particular kind of debtors. Chapter 11 is similar to Chapter 13 but it is meant for large corporations and big businesses. It is also open to high net worth individuals but most of the time does not make any sense to them.
Chapter 12 is specifically meant for fishermen and farmers. It has more relaxed and flexible repayment terms than those in Chapter 13. Moreover, it also offers options for cramdowns and lien stripping on any portion of secured loans that unsecured.
Bensalem Pennsylvania bankruptcy attorneys advice on the selection of the right type of bankruptcy
The type of bankruptcy that you pick is dependent on your assets and income. Income is used as a determining factor in Chapter 7. You may also lose any nonexempt property in this chapter. Here are a few scenarios that can help in making the right decision.
Unemployed Homeowner Whose Mortgage is Not Current
If you are a home owner that has no stable source of income consider Chapter 7. This also applies to property whose value has gone below the amount of loan advanced. The homeowner does not have equity on such a property, so it cannot be liquidated.
Unemployed with Large Debts and a Few Assets
If you are in so much debt and owns no house, car, or other property, Chapter 7 is the best. It is quite easy to file a ‘no asset’ bankruptcy and get rid of debts.
Wealthy with Large Debts
If you are very wealthy but also have several large debts, consider Chapter 11. Unlike other chapters, this chapter does not have income and debt limits.
Employed Individual with Significant Assets
If you are employed and have significant assets, you may go either with Chapter 7 or with Chapter 13 especially if you have significant equity on your property. If a large amount of equity is exempted in filing for bankruptcy, Chapter 7 is ideal. However, if not, go for Chapter 13. Keep in mind that you must have regular income to pay off the debts in Chapter 13.
Bensalem Pennsylvania Bankruptcy Attorneys Assistance in Filing for a Bankruptcy
The law of bankruptcy is quite tricky. Simple technical errors in the application and filling of forms can lead to the court rejecting your application. It is important to seek the assistance of an experienced bankruptcy attorney in the process. The attorney acts as your financial adviser, looks at your financial status, and advises on the chapter that is likely to give you more relieve or a longer period to pay your debts.