Filing Chapter 7 bankruptcy is a preferred solution of the debtors due to its fast and effective ways. The fact that it does not require payments over time also makes it highly acceptable.
However before you decide on Chapter 7 bankruptcy you need to check out whether you qualify for the Means Test of your state. If it is seen that your income is sufficient to fund a Chapter 13 repayment plan even after canceling out your expenses and monthly debts, you will not be allowed to file Chapter 7 bankruptcy.
Benefits of Chapter 7 Bankruptcy filing
If you have qualified for the Means Test criteria of your state then you can look forward to Chapter 7 bankruptcy filing. Take a look at the advantages you can procure by filing bankruptcy:
•If you file a Chapter 7 bankruptcy case it is normally opened and closed within three to six months. You clear out on your debt amount completely when the bankruptcy process is complete.
•Unlike Chapter 13 bankruptcy you are not required to repay any portion of your debts.
•You can keep most of your properties intact unless you have pledged the item as collateral for a loan. But all of your debts cannot be discharged. You can discharge most of your debts except for mortgage, car payments, student loans, recent taxes, and unpaid child support.
•No minimum debt amount is fixed for filing a Chapter 7 bankruptcy plan.
•The creditors are not applicable to claim on any new property or wages you get hold of after the discharge. The property will be completely owned by you and your creditors cannot exert any further claim on them.
Demerits of Chapter 13 Bankruptcy
If you are considering filing Chapter 13 bankruptcy have a look at the following disadvantages:
•You are obliged to repay your debts out of your post-bankruptcy income. You are therefore tied up with your cash over the repayment period.
•Many of the debts will continue even after the closure of your bankruptcy account.
•As Chapter 13 is a more complicated process the legal fees are quite high.
•You need to fulfill the minimum debt amount criteria in order to file Chapter 13 bankruptcy. It is obligatory that your debt must be under $1,000,000 (unsecured debts-less than $250,000 and secured debts-less than $750,000).
•The debt stays on your report for many years which in turn hampers your future income options.
•Stockbrokers and commodity brokers are not allowed to file a Chapter 13 bankruptcy petition.
•You need to complete an entire three- to five-year repayment plan in order to get your remaining debts discharged. If you do not complete on your plan term you run a risk of not getting your debts completely discharged.
It may apparently appear that Chapter 13 bankruptcy is devoid of any positive markings. However it has its share of advantages too. There are a number of drawbacks associated with it. But on the flip side there are also reasons why many people opt for Chapter 13 bankruptcy and not Chapter 7 bankruptcy.
Both Chapter 7 and Chapter 13 can get you out of your debt crisis in their own way. But the impact of both varies depending upon the financial situation and preference of the debtor. The processes may have different style of approach but the importance attached to each one of them cannot be undermined.