Either could help when you don't have the means to pay all your bills, but there are important differences between the two. A Chapter 7 bankruptcy can wipe out certain debts within several months, but a court-appointed trustee can sell your nonexempt property to pay your creditors. You also must have a low income to qualify. A Chapter 13 bankruptcy allows you to keep your stuff and get on a more affordable repayment plan with your creditors.
A court will approve the Chapter 13 repayment plan, which usually lasts three to five years, and your trustee will collect your payments and disburse them to your creditors. Once you finish the plan, the remainder of the unsecured debts is discharged. Who Qualifies For Chapter 7 Bankruptcy There are a few requirements you'll need to meet to file for a Chapter 7 bankruptcy:.
A Chapter 7 bankruptcy will generally discharge your unsecured debts, such as credit card debt, medical bills and unsecured personal loans. The court will discharge these debts at the end of the process, generally about four to six months after you start. Some types of unsecured debts usually aren't discharged through a Chapter 7 bankruptcy, including:. Your creditor could also object and keep certain debts from getting discharged. For example, a credit card company could object to the debt from recent luxury goods purchases or cash advances, and the court may decide you still need to repay this portion of the credit card's balance.
Additionally, a Chapter 7 bankruptcy may discharge the debt you owe on secured loans. Secured loans are those backed by collateral, such as your home for a mortgage, or when a creditor has a lien on your property. However, even if the debt is discharged, the creditor may still have the right to foreclose on or repossess your property. If you file for Chapter 7 bankruptcy, you may lose your nonexempt belongings, property that has a lien on it and property you offered as collateral for a loan.
Double these amounts if you're married and file a joint tax return. Keep in mind that states may have different exemptions and limits that you can or must use when filing bankruptcy. A trustee can't take property when its value is less than the exempt amount, which means you may be able to keep your home and vehicle. A similar scenario could play out with other forms of secured debts, such as an auto loan.
However, just because the trustee can't take and sell these assets doesn't mean you'll get to keep them in the long run. When you're behind on your payments, your creditors can still foreclose on your home or repossess your vehicle once you complete the bankruptcy process. If you want to keep possessions that are securing your debts, you may have to continue making payments on the loan if you're not already behind or pay the full price to purchase the item.
Generally, the entire Chapter 7 process from the initial credit counseling to the point when the court discharges your remaining debts takes about four to six months. Your case could take longer, however, such as when the trustee asks you to submit additional documents or if they have to sell your property to repay creditors. Or, perhaps you want to try to get your student loans discharged in bankruptcy.
It's possible, but difficult, and can require a lengthy trial. A Chapter 7 bankruptcy is a major derogatory mark that can hurt your credit for years to come. The Chapter 7 bankruptcy record can stay on your credit reports for up to 10 years from the filing date, and a completed Chapter 13 bankruptcy can remain on your credit report for seven years from the filing date.
The accounts that were included in your bankruptcy may fall off your credit report earlier, as most negative marks get removed after seven years. How to File for Chapter 7 Bankruptcy You can choose to file for Chapter 7 bankruptcy on your own or hire an attorney to help. We think it's important for you to understand how we make money.
It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials. Compensation may factor into how and where products appear on our platform and in what order.
But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates. Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can. A bankruptcy means test determines whether your income exceeds a certain amount.
The process involves filling out one or possibly both forms below, and making calculations based on the information you input, to determine whether you pass the bankruptcy means test. If you get lost or have more questions about whether bankruptcy is right for you, find a bankruptcy professional to help. Enter your name, the bankruptcy court you filed in, and your case number if you have one. Filling out the average monthly income section should be straightforward.
Simply add up your income from the previous six months for each source. Make sure you use the gross amount before taxes and deductions. Make sure to include income you expect to receive from spousal or child support, income from businesses you own, income from investments you own such as dividends , unemployment income, retirement income or any other income you may receive.
Make sure you include all of your income. In general, if you receive a deposit in your bank account, that deposit may be income you should consider listing. Some high earners may not qualify for Chapter 7 if their debts are primarily consumer debts. With the help of experienced bankruptcy lawyers, most people who want to file Chapter 7 can do so.
Chapter 7 is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships. The case is begun by filing the official petition, schedules and statement of financial affairs. These forms prompt you to list all of your assets and all of your debts, along with some recent financial history. It is important that every creditor is listed in the schedules with an accurate mailing address.
You must list all of your debts, even if the debt is non dischargeable or if you intend to reaffirm the debt. The schedules also list your property, any debts secured by that property, and the sale value of the property. More on property in bankruptcy. Your choice of exemptions is made on one of the schedules.
The schedules are signed under penalty of perjury. False or recklessly inaccurate schedules can prevent you from getting a discharge. The schedules are filed with the bankruptcy clerk in the district in which you live, or have lived for the greater part of the last days.
For most purposes, the rights of the debtor and the creditors are those that exist on the day the case is filed. All of the proceedings in bankruptcy after the filing relate to the situation as it was on the day the case was filed. The automatic stay goes into effect upon filing the petition, creating a legal barrier to collection actions by creditors.
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