Bankruptcy

Bankruptcy Chapter 7 vs Chapter 13

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Are you considering bankruptcy? Learn the difference between bankruptcy Chapter 7 vs Chapter 13. We can help you make the right choices.

A bankruptcy is a legal action for people who see no other way out of paying their extensive debt, which includes having tried a debt relief company. In fact, you will have to complete a court appointed debt counselor program before you can file for bankruptcy. The debt relief company oftentimes will help you avoid bankruptcy by offering a debt payment program but sometimes this is not an option. In this case, bankruptcy may be the only option for you. There are two options you can file that are explained below.

If you are severely overwhelmed and have reached the point where you are asking yourself “do I need to file bankruptcy?” then you probably will need to do so. A bankruptcy is a legal action for people who see no other way out of paying their extensive debt, which includes having tried a debt relief company. In fact, you will have to complete a court appointed debt counselor program before you can file for bankruptcy. The debt relief company oftentimes will help you avoid bankruptcy by offering a debt payment program but sometimes this is not an option. In this case, bankruptcy may be the only option for you. There are two options you can file that are explained below. Bankruptcy laws were written so that if your find yourself in such a state that you are overwhelmed with the debt you have incurred and you don’t have any money remaining in your budget to pay that debt, bankruptcy may be the only option. It could prevent or delay foreclosure on your home or repossession of your car. There are two options when choosing to file bankruptcy, Chapter 7 and Chapter 13.

You must understand that there is a price to pay for filing bankruptcy for the chance to start over. The bankruptcy will remain on your credit report for 10 years which could affect your future credit. You might be able to buy a home two to three years after you file bankruptcy, so if you intend to delete all of your debt in one fell swoop, you might think of bankruptcy as a starting over point to obtaining your financial goal of buying a new house or car. Use your credit wisely and your bankruptcy will not be as important as the new credit you get and maintain. It is best to get a prepaid credit card instead of a store card. Not only are you paying ahead of your purchases, but you also won’t be charged the higher interest rate of a store card.

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, the most popular form, you will receive court judgment releasing you from responsibility for repaying debt. You will be allowed to keep key assets, called “exempt” property, but “nonexempt” property will be sold to repay your debt. “Exempt” property includes your home, the vehicle you use for work, pensions, Social Security checks, Veteran’s benefits, Welfare and retirement. This property will not be sold you pay your debt. What assets will be sold by a court trustee when filing a Chapter 7 bankruptcy? “Nonexempt” property (which are called assets) such as property that’s not your primary home, A newer model vehicle with equity, expensive musical instruments that aren’t needed for your business, a valuable stamp or coin collection, valuable artwork, cash, bank accounts, stock investments, etc. will be liquidated and the profits used to pay your debt.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, you will repay some of your debts to have the rest forgiven. This option is for people who don’t want to give up their property or don’t qualify for a Chapter 7 bankruptcy because their income is too much. You will make a three-to-five-year plan to pay off your creditors. At that time, all your debts will be deleted.

If you are considering bankruptcy, it can be very stressful. The difference between bankruptcy Chapter 7 vs Chapter 13 will matter greatly. Freedom to Dream Financial can help you navigate your bankruptcy options to get your credit back on track. Contact us today. We can help!

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