When faced with financial troubles, it might feel like there are few options to save the sinking ship. However, before jumping on the bankruptcy train and searching for a Chapter 13 bankruptcy lawyer, it’s important to consider what exactly Chapter 13 is, compared to Chapter 7, and whether it’s the best option for you and your unique situation.
Why Can’t I File for Chapter 7 Bankruptcy?
If you’re familiar with Chapter 13 bankruptcy, Chapter 7 has no doubt come up in conversation. However, there are certain qualifications one must meet in order to be eligible for Chapter 7 filing. Chapter 7 bankruptcy is structured for those that have less disposable income to repay their debt, wherein their property may be collected and sold to pay back some or all of their creditors.
To qualify for Chapter 7 bankruptcy, you must pass the means test, which takes into account your income, family size and extra expenses. Though, if your debt is mainly from your business, you won’t need to pass the means test – since it’s primarily for debts resulting from things like credit cards or medical expenses. Consulting with a Chapter 13 bankruptcy lawyer will tell you that the means test definitely plays a role in determining your repayment schedule.
Pros to Filing Chapter 13
Chapter 13 bankruptcy filings, unlike Chapter 7, allow you to keep your property and any other assets that otherwise would be subject to repossession by the trustee. In Chapter 7 bankruptcy, the valuable property is then sold by the court who disperses the resulting funds to your creditors to pay off some or all of your debts. However, with Chapter 13, you get to keep your property.
Also with Chapter 13, you’ll be offered longer repayment plans than someone filing Chapter 7. Typically ranging from three to five years, the repayment period is structured so that you can use your disposable income to repay your creditors over a longer period of time as to not take a large sum from your funds all at once.
Payment relief is another pro to consider with Chapter 13. Some debts like student loans will survive bankruptcy, meaning your obligation to repay them will never go away, but there are others that the bankruptcy court can relieve you from paying. Ask your Chapter 13 bankruptcy lawyer what debts, if any, you can avoid repaying.
Cons to Consider Before Searching for a Chapter 13 Bankruptcy Lawyer
With the longer repayment plans also comes longer payment periods. Sure, your debt repayments are small and manageable, but they’re stretched out over several years. Consider the future you had in mind and whether these continued payments will negatively affect those plans, like buying a house, student loans, etc. If you are consulting with a Chapter 13 bankruptcy lawyer, don’t be afraid to ask these kinds of questions, as your future financial health depends on smart decision making now.
Chapter 13 filings allow you to keep your property and other assets, but it will cut into your cash flow. The point of filing Chapter 13 instead of Chapter 7 is that you have enough disposable income to make steady repayments to your creditors over a period of time. This means that any extra cash you have coming in that isn’t going towards your family or other necessary expenses goes straight toward paying off your debt.
Like any bankruptcy filing, Chapter 13 will ding your credit. Even though a Chapter 13 bankruptcy will remain on your record for years, other concerns like missed debt payments, repossessions, lawsuits and defaults can also hurt your credit and are not as easily explained away to a future lender.
Secure the Right Chapter 13 Bankruptcy Lawyer to Begin Rebuilding Your Future
Filing for Chapter 13 bankruptcy sooner rather than later can jumpstart your journey back to financial health and give you all the more time to rebuild your credit. There are plenty of considerations to Chapter 13 bankruptcy filings, but the first you must find the right Chapter 13 bankruptcy lawyer for your case.
At CMC Law, we are your trusted bankruptcy lawyers and are here to advise you on the best route to take to regain your financial security. If you’re considering filing for bankruptcy, call us today at 404-585-0040, or go online to schedule a free bankruptcy evaluation and get your peace of mind back.
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