What Are the Benefits of Chapter 7 Vs. Chapter 13 Bankruptcy?

 Posted on October 25, 2021 in Bankruptcy

In the United States, it is far too easy for a family to be burdened with overwhelming debt. Even if a family does everything they can to manage money as carefully as possible, they may experience unexpected difficulties that put them in an impossible financial position. In many cases, these debts occur because of medical bills, but a family may also struggle due to the loss of a job, a health condition that prevents a person from working, fire or natural disaster, or any number of other issues. When debts become so large that they will be impossible to repay, different forms of debt relief may be available, including bankruptcy. By understanding the benefits of different types of bankruptcy, a family can determine their best options for receiving a fresh financial start and moving on from this difficult situation.

Benefits of Chapter 7 Bankruptcy

A Chapter 7 bankruptcy may be the best approach for many families. It offers the ability to completely eliminate any debts owed by a family, allowing them to get a true fresh start. This type of bankruptcy can often be completed within a few months, and by relieving them of the requirement to repay debts, it will allow a family to begin rebuilding their finances while meeting their ongoing needs.

However, families should be aware that during a Chapter 7 bankruptcy, they may be required to turn over certain assets, which will be liquidated to repay as much of their debts as possible. Certain types of assets are exempt from liquidation, but a family may be unable to maintain ownership of any property that has been used as collateral in secured debts. Chapter 7 bankruptcy may not be able to prevent the foreclosure of a home or the repossession of a vehicle or other property.

Benefits of Chapter 13 Bankruptcy

For those who do not qualify for Chapter 7 bankruptcy or who wish to maintain ownership of their home or other property, Chapter 13 bankruptcy may be a preferable option. This type of bankruptcy is known as reorganization bankruptcy, and a family’s debts will be consolidated into a repayment plan that will be based on the amount of disposable income they have available to make payments toward debts. A family will make these payments for a period of three to five years, and after completing all payments, the remaining debts that were included in the plan will be eliminated.

While a Chapter 13 bankruptcy may provide debt relief while allowing a family to avoid foreclosure or the repossession of property, it may be difficult to put all disposable income toward a repayment plan for several years. If a plan is not completed, the bankruptcy case may be dismissed, and the family will continue to owe all of their debts.

Contact Our New Braunfels Bankruptcy Attorney

If you have questions about which type of bankruptcy is right for you, or if you want to learn about alternative options for debt relief, Law Offices of Chance M. McGhee can provide you with legal help. Contact our San Antonio bankruptcy lawyer today at 210-342-3400 to set up your complimentary consultation.

Sources:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics