Let us start with short overview of Chapter 7. Needless to say that it is very popular with both businesses and individuals who are preparing to file bankruptcy. This Chapter is also known as no-assets or straight bankruptcy.
The main feature of this law suit is the fact that all your debts can be wiped out with the exception of exempt assets. In other words you can keep your home, car and even retirement account. All your assets will be handled by trustees who are assigned by the court. They will liquidate assets in order to pay out all debts. However if those assets will not be enough, they will be erased from other sources. Creditors are not allowed collecting or demanding payments in case you are using Chapter 7.
Here is the list of debts that can be discharged in accordance with Chapter 7:
- child support;
- restitutions and criminal fines;
- driving fines;
- student loans;
- agreements on purchasing vehicles and land, etc.
Chapter 13 is more likely to meet requirements and expectations of businessmen who do not want to close their business and are looking for any possibility for its further development. The main idea is such type of bankruptcy is the fact that it provides with all necessary conditions for reorganizing of debt. It is followed by new repayment plan which is approved by the court. This plan will also depend on the level of your income as well as other factors which may include on the nature and total amount of the debt.
Here is the list of debts which can be discharged with the help of Chapter 13:
- child support;
- criminal fines;
- judgments on drinking driving;
- student loans.
Why Chapter 7 Is More Popular In Comparison With Chapter 13
When it comes to choosing the type of bankruptcies you need to have a clear understanding whether you need to make this step and what future perspectives you have. If your financial situation is actually hopeless, Chapter 7 will certainly be the best bet for you. You are recommended using this lawsuit in case of the following:
- there is no hope to repay all your debts;
- there are debts with no co-signers;
- you are likely to be sued by creditors in the nearest future;
- you want to protect exempt property.
On the other hand if the situation does not seem to be so hopeless, Chapter 13 may certainly turn out to be a good solution to financial problems. You should file for it in case of the following reasons:
- you used Chapter 7 within last 6 years;
- there are debts with co-signers;
- you are able to pay out the whole debt within 3-5 years;
- you require some time to reorganize your financial situation to continuing paying the debt.