Understanding Chapter 7 And Chapter 13 Bankruptcies
Many people encounter financial difficulties at some point in their lives. With recent developments in the U.S. economy, bankruptcy has become a much more widely accepted method for taking control over ones outstanding debts and paying off creditors. However, many people still do not understand the distinctions between different forms of bankruptcy. This misconception is especially true of Chapter 7 and Chapter 13 bankruptcy, because the two actually seem very similar. However, knowing about and understanding both of these forms of bankruptcy is important if you are trying to decide which method is right for you.
There are several key distinctions between Chapter 7 and Chapter 13 bankruptcy, though both are available to individual filers and business owners. These key differences include:
* Construction of repayment plans in Chapter 13 bankruptcy, designed for gradual repayment
* Asset liquidation in Chapter 7 bankruptcy, for immediate repayments
* Implementation of the means test in Chapter 7 bankruptcy to determine eligibility for bankruptcy proceedings
These critical differences between the two most common forms of bankruptcy are important to understand. The primary difference that appears to really sway debtors one way or another is asset liquidation. By liquidating ones assets, such as property or vehicles, one can immediately repay debts to creditors, as opposed to taking much longer through Chapter 13 bankruptcy repayment plans. But Chapter 13 allows for the debtor to retain control of his or her assets. Both forms of bankruptcy can be beneficial for the debtor who wants to clear himself or herself of financial debt, and deciding between each form is an important decision to make.
Sometimes deciding which form of bankruptcy to file for seems daunting, but it does not have to be.