Car Accidents and Lawyers to Reduce Stress

Posted on: 20 February 2015

For many people, filing for personal bankruptcy can provide the fresh start they need to finally regain control of their finances. However, if these individuals fail to choose the right type of bankruptcy petition for their specific needs, they may find that filing for bankruptcy actually does more harm than good. In order to prevent making this same mistake in your life, you will need to take a moment to review the differences between Chapter 7 and Chapter 13 bankruptcy and how learn how these differences may affect the outcome of your bankruptcy case. The information outlined below can help you in accomplishing this task.

Option #1: Chapter 7 Bankruptcy

Your Debts

Chapter 7 bankruptcy addresses the issue of unsecured debts. These are debts that are obtained without the use of collateral, such as a home or vehicle, to secure the debt. The most common types of unsecured debts are medical bills and credit card bills.

When filing for Chapter 7 bankruptcy, you will have the opportunity to discharge your unsecured debts. This means that you will no longer be legally responsible for paying these debts and that your creditors are no longer able to use collection methods to try and collect these debts from you. However, any secured debts that you owe will still need to be paid in full or you will risk having the collateral that was used to secure these debts repossessed by your creditors.

Your Assets

Filing for Chapter 7 bankruptcy can also have a huge impact on your assets, especially if you have several valuable assets that you wish to keep. This is because, in exchange for your ability to discharge certain debts, the bankruptcy court will limit the value and type of assets that you are allowed to keep.

While bankruptcy exemption laws will protect some of your assets, such as a modest home and vehicle, these laws will not protect assets that are not considered essential to your financial recovery. Consequently, expensive jewelry or high-end electronics will not be protected by these laws. Instead, these excess assets will be seized by the bankruptcy court and auctioned off in order to pay as much of your outstanding debt as possible before discharging any of your debts.

Option #2 Chapter 13 Bankruptcy

Your Debts

Chapter 13 bankruptcy is not designed to eliminate your debts, but rather to restructure them. By allowing you to set new repayment terms and waive administrative fees, the bankruptcy process will help to make it easier for you to repay your debts over time. This type of bankruptcy is particularly beneficial to individuals with a large amount of secured debt since both secured and unsecured debts can be addressed as part of a Chapter 13 petition. However, it is important to note that restructuring a secured debt as part of your bankruptcy does not guarantee that the collateral used to secure this debt will not be repossessed. If you do not abide by the terms of your new repayment agreement, your creditors will still have the right to use a variety of collection methods, including repossession, to recoup their losses.

Your Assets

Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy will not have an impact on your assets. This is because none of your debts will be discharged as part of these proceedings. Therefore, there is no need to use your assets to repay these debts. This can be a serious benefit to individuals with valuable assets that would not be protected by exemption laws.

For more information about bankruptcy and which option is best for you, contact an attorney such as John G Rhyne Attorney At Law.