The two most common types of bankruptcy, that can be filed, are a Chapter 7 and a Chapter 13. If you are contemplating bankruptcy; you need to know the differences between the two.
Chapter 7 Bankruptcy
With a Chapter 7 bankruptcy you are able to eliminate most of your debts. For example, you can eliminate credit card bills, medical bills and car payments. However, you are expected to liquidate your property to pay off your debtors. However, the law allows certain property to be exempt from the liquidation. For example, in Nevada, you do can keep your car if it worth $15,000 or less. Also, you are allowed to keep a single firearm. Basically, the filing of Chapter 7 will not leave you destitute; but, you will not likely be able to keep you Rolls Royce or Ming vase and expect to file a Chapter 7 bankruptcy.
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For the majority of people Chapter 7 is the best alternative. However, with the 2005 bankruptcy reform, Chapter 7 now can be harder to file. A consumer can only file a chapter 7 if they meet certain income requirements. These income requirements are based upon the state median wage and number of dependents that you have. Your median wage is calculated using a six-month average of your salary. Basically, if you make more than the median salary, for that six months salary, you will not be able to file a Chapter 7.
Chapter 13 Bankruptcy
However, if you do not qualify for a Chapter 7 Bankruptcy you should consider filing a chapter 13. A Chapter 13, unlike a Chapter 7, does not require you to sell any assets to pay off your debtors. What a Chapter 13 you make a payment plan to pay back your debts over a three to five your period. One advantage of a Chapter 13 is that you can be able to "Strip Off" your second mortgage. Also, you can keep a car even when you are behind on payments.
There are several disadvantages with a Chapter 13 bankruptcy. First of all, the bankruptcy process can be psychologically damaging. A Chapter 7 Bankruptcy is finished within a few months. But, a Chapter 13 drags on for three to five years. Also, a high percentage of people do not even finish a Chapter 13 bankruptcy. So, I would only recommend a Chapter 13 Bankruptcy when you have assets you desire to keep and/or you make too much money to qualify for a chapter 7 bankruptcy.
The two most common types of bankruptcy, that can be filed, are a Chapter 7 and a Chapter 13.If you are contemplating bankruptcy; you need to know the differences between the two.
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