Debt accumulation is an issue millions of Americans deal with and comes in many various forms. Consumer debt is one of the most common debts, originating from the likes of credit cards and payday loans. High interest rates can make it nearly impossible to become debt-free, forcing people to consider bankruptcy as viable debt relief option.
Consumers in significant debt are usually restricted to Chapter 7 or Chapter 13 bankruptcy to regain financial freedom. It can be difficult to understand the difference between the two as they share many similarities, but they do have some fundamental differences. Debts, income, financial goals, and assets are all considered when selecting the appropriate bankruptcy option. With certain details clarified and the help of an attorney, you can pursue the most appropriate type of bankruptcy.
Chapter 7 Bankruptcy Facts
Otherwise known as “liquidation bankruptcy,” Chapter 7 bankruptcy involves the process of selling all non-exempt assets to pay off creditors. This type of bankruptcy most favorable for individuals with little to no assets who would like to eliminate all of their unsatisfied debt. The facts of Chapter 7 bankruptcy are:
- Any person or business entity can file
- Individuals must pass the “Chapter 7 Means Test” to be eligible
- Discharge usually takes 3 to 5 months
- Trustee identifies and sells all nonexempt property to pay creditors
- Debtors can eliminate debts promptly and start over
- There is no option to make up on missed payments or avoid repossession
Chapter 13 Bankruptcy Facts
Those who would like to continue to operate their business or retain their valuables throughout the process may consider Chapter 13 bankruptcy, also known as reorganization bankruptcy. Trustees do not sell exempt or nonexempt assets to pay creditors. Instead, reorganization bankruptcy restructures payment plans in a manner that makes it easier to manage payments. The facts of Chapter 13 bankruptcy are:
- Only individuals (or sole proprietors can file)
- Individuals must have less than $394,725 in unsecured debt and $1,184,200 in secured debt
- Discharge usually takes 3 to 5 years or whenever the debtor completes the payment plan
- Permits lien stripping for the removal of unsecured junior liens
- Reduces principal loan balance on secured debts
- Debtors keep their property while catching up on debt
- Debtors must make monthly payments and may have to pay a portion of general unsecured debts
An experienced bankruptcy attorney with E. Orum Young Law Offices can help you determine the most appropriate bankruptcy option for you. We have over 35 years of experience and have filed more than 20,000 bankruptcy cases in Northeast Louisiana. We will protect your interests every step of the way and can rush file your claim if necessary. Contact us today for a free case evaluation.