What’s the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?
Posted on Monday, January 25th, 2016 at 9:10 am
Anyone who needs to file a bankruptcy is faced with an important choice: Chapter 7 or Chapter 13? Finding out what those terms mean is as simple as going to your local library, but knowing when you can file a Chapter 7 or when you should choose a Chapter 13 requires expert legal knowledge. At Lawrence & Associates, our Northern Kentucky attorneys can make sure you file the right kind of bankruptcy for your situation, whether you are facing foreclosure from a bank like Wells Fargo, being sued for medical bills by a hospital like St. Elizabeth, or confronting a mountain of Capital One credit card debt.
Choosing the right kind of bankruptcy can mean the difference between keeping your house, keeping your car, keeping your money, or losing it all. Geography matters: Northern Kentucky and Cincinnati have very different bankruptcy exemptions, and this is a big factor in the choice between Chapter 7 and Chapter 13. Other factors include your past income and current assets. Only by knowing the asset exemptions and median income levels applicable to the Northern Kentucky and Cincinnati areas can the choice between Chapter 13 bankruptcy and Chapter 7 bankruptcy be made. For example, the median income is lower for Northern Kentucky residents than it is for Cincinnati residents, and people over median income have to file Chapter 13. Therefore, if all else is equal, someone living in Cincinnati can file a Chapter 7 with the same income that forces a Northern Kentucky resident into a Chapter 13!
What Stops You From Filing a Chapter 7 Bankruptcy?
In general, you cannot file a Chapter 7 bankruptcy if you: a) have filed a bankruptcy in the last eight years; b) have assets with significant, unexempt value that you don’t want to lose, or; c) have income over median for your household size in the Commonwealth of Kentucky. Anyone falling into any of those categories may have to file a Chapter 13 bankruptcy. Figuring out how to correctly assess the value of your property, or the correct number for median income, can be a daunting task. Further, the consequences of making a mistake are very drastic; you could lose your property or get kicked out of bankruptcy and into the arms of your creditors! The attorneys at Lawrence & Associates can make sure your bankruptcy is filed correctly so that you get the maximum benefit from your decision to file.
Why Might You Want to File a Chapter 13 Bankruptcy?
If you are behind on a secured debt such as a mortgage or a car loan, but want to keep the house or car, you will have to file a Chapter 13 bankruptcy so you can set up a payment plan. There is no such thing as a repayment plan in a Chapter 7 bankruptcy, and if you are behind on paying the debt on a car or house then you will lose it. The repayment plans afforded in a Chapter 13 Bankruptcy also go toward non-dischargeable debts such as taxes, student loans, or child support. If your current repayment schedule makes it impossible to make ends meet, then filing under Chapter 13 allows you to change the repayment schedule to suit your monthly budget.
Another reason to file a Chapter 13 bankruptcy is to get predatory car loans under control. Many Chapter 13 bankruptcy filers can reduce the amount they need to pay on a car loan if they have owned the car for more than two-and-a-half years and if the amount on the loan is more than the value of the car. Also, the interest rate on a car loan can often be reduced when the loan is paid off through a Chapter 13 bankruptcy.
How Can I Get My Bankruptcy Started?
Lawrence & Associates employs highly skilled bankruptcy attorneys, and we offer free consultations with an attorney to find out whether Chapter 7 or Chapter 13 is right for you. Get the answers you are looking for, and avoid the hassle of creditors and the confusion of following the bankruptcy laws on your own. We are Working Hard for the Working Class, and we want to work hard for you. Call Lawrence & Associates today!