Which Bankruptcy Chapter is Right for Me?
Filing bankruptcy is not something to do on a whim. It takes a lot of planning and a lot of legal preparation before proceeding. Once you make the decision to file, which chapter should you file? Before making a final decision, the first step is to take the Arizona means test.
CHAPTER 7 BANKRUPTCY
If you take the means test and fall below the median income level for your family size, filing for chapter 7 bankruptcy may be a good option for you. Chapter 7 bankruptcies take less time to file from start to finish and are a good way for you to start over debt-free.
Chapter 7 bankruptcies are also known as liquidation bankruptcies, and that is because your unsecured debts are often discharged by the court at the end of the case.
Things that do not get written off are student loans, child support, alimony, and unsecured debts that were left off of the original filing.
The average time for this type of bankruptcy can take anywhere from four to six months, but during that time you will be required to work with a court-appointed trustee regarding your assets and finances. They are the ones who may end up making payments to your creditors if you have the means to do so prior to discharge.
It is possible for your credit score to improve after filing for bankruptcy, however, a chapter 7 bankruptcy can remain on your credit report for up to ten years from the date of filing.
CHAPTER 13 BANKRUPTCY
Chapter 13 bankruptcy is a program that helps restructure your debt. This is helpful for those people who have higher-priced items that will not fall under the exemption as well as those who simply want to get their existing debts caught up. This allows them to pay their past due amounts over time.
Generally, a chapter 13 payment plan for creditors runs for anywhere from three to five years. Once the terms of the agreement have been met, the debts are generally discharged.
In order to file a chapter 13 bankruptcy, it is a requirement that the debtor has a steady source of income and a disposable income that supports the agreed-upon payment plan.
This bankruptcy will only stay on your credit history for up to seven years but also helps your score because you are paying on the debts that previously brought your scores down.
WHAT IS THE BEST CHOICE?
There is no way to say which bankruptcy choice is the best for your current situation. A lot of bankruptcy lawyers will set you up with a consultation and let you know what you will need in order to file.
The most popular bankruptcy proceedings seem to be chapter 7, but that is because it is a discharge of debt and the debtor can start over.
A debtor cannot file for chapter 7 bankruptcy except for one time every eight years, and three different times in your lifetime.
A debtor cannot file for chapter 13 bankruptcy two years after a previously discharged bankruptcy and there is no lifetime limit.
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