In the United States, it’s said that 10 out of every 1000 people file for bankruptcy each year. Those who do file make this financial decision for several different reasons. Some of the most common include overextended credit, inability to make payments to creditors, and debts that outnumber the financial value of personal assets.
If you’re considering filing for bankruptcy, you should know that you’re not alone and that making the decision to file can get you back on track toward financial freedom. However, before you take action, it’s essential to understand the basic principles surrounding bankruptcy – including how creditors are paid.
How Creditors are Paid in Chapter 7 Bankruptcy
For individuals who do not have a large number of assets, Chapter 7 Bankruptcy is the most common form of bankruptcy being filed. The most significant benefit of Chapter 7 Bankruptcy is that it can rid an individual of multiple types of unsecured debts and is considered a quick option for a fresh start. As soon as a Chapter 7 Bankruptcy is filed and finalized, creditors can no longer seek payments for the debts that were forgiven.
If you file a Chapter 7 Bankruptcy, creditors are paid through the liquidation of your assets. That means if you have a home, vehicles, or any other personally owned assets that can be turned into cash, you will be required to surrender them to repay your debts. In addition to your assets, you will also be required to pay a filing fee to cover the cost of the necessary paperwork.
How Creditors are Paid in Chapter 13 Bankruptcy
Many individuals who have numerous assets but are unable to afford their debts choose to file a Chapter 13 Bankruptcy over Chapter 7. When you file a Chapter 13 Bankruptcy, your debts are not erased. Instead, they are made more manageable through an affordable payment plan.
The repayment plan for a Chapter 13 Bankruptcy is determined in Bankruptcy Court. Creditors submit claims regarding the amount the individual filing for bankruptcy owes, and an affordable repayment plan is decided upon and agreed to between the court and the individual. More often than not, the repayment plan only requires the individual filing for bankruptcy to repay a fraction of the amount owed to the debtors. Once that amount is repaid, all debts are erased and you are able to move forward, debt free.
Your Experienced Louisiana Bankruptcy Attorney is Here To Help
If you’re in a difficult financial situation and you’re considering filing for bankruptcy, a smart first step is to call an experienced bankruptcy attorney to help you navigate this situation. The attorneys at E. Orum Young Law Offices offer a free case review and have used their expertise in more than 20,000 cases over 35 years.
Call the office at 318-450- 3192 or submit our contact form online today to get started on your way to debt relief.