Need help understanding Chapter 7 vs Chapter 13? Our Raleigh NC Bankruptcy Lawyer can help
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Are you struggling with insurmountable business debt, medical bills, student loans, or even credit card debt? Most people’s reactions to their own overwhelming debt are to go to bed, pull the covers over their heads, and not answer their phones. We understand that sometimes, life gets in the way and people go through undue hardship. A debtor comes knocking on your door.
Our Raleigh Bankruptcy Attorney is the answer. At Cameron Bankruptcy Law, we offer personalized bankruptcy services so you can get relief from debt and bring peace of mind back into your life.
Filing bankruptcy in a bankruptcy court can be difficult. Through Chapter 7 or Chapter 13 filing, we can help you take back your financial freedom and get back on track to financial success!
Secured debts vs unsecured debt
The primary distinction between the two is the presence or absence of collateral, which serves as a security for the lender against the borrower’s non-repayment. Unsecured debts do not have collateral backing, while secured debts are backed by collateral.
Chapter 7 and Chapter 13 bankruptcy are two very distinct legal choices with very different potential implications, although both can be beneficial to borrowers who are drowning in debt.
Chapter 7 bankruptcy, commonly referred to as liquidation, is a legal procedure that can assist you in eliminating some or all of your debt. However, doing so will require the surrender of assets such as property or cash.
Chapter 13 bankruptcy is another legal alternative that can help you discharge some debt while allowing you to keep your property and repay your debt over a three- to five-year payback period.
However, before declaring either sort of bankruptcy, you should analyze the nature of your debt. Both Chapter 7 and 13 will not allow you to discharge the following:
- Support for children
- Various taxes
If your debts fall outside of those categories and you’ve exhausted all other available repayment alternatives — such as seeking assistance or credit counseling — Chapter 7 or Chapter 13 bankruptcy may be able to help. Each offers a number of advantages and disadvantages, so it’s critical to thoroughly examine which is the best option for you.
Should I apply for Chapter 7 bankruptcy?
Chapter 7 bankruptcy may be a viable alternative if you have little or no disposable income. Indeed, you will need to pass a means test to demonstrate that you cannot afford to repay your debt.
Consider the following while determining whether Chapter 7 bankruptcy is best for you.
1. It may help you manage your monthly loan repayments more effectively
When you obtain a Chapter 7 bankruptcy discharge, you are no longer legally compelled to repay that amount. This means that the money you were previously paying toward a loan or credit card can now be used for other purposes, such as household essentials.
Notably, there are a number of exceptions to the debts that can be discharged under Chapter 7, and we strongly advise you to consult with a bankruptcy attorney prior to filing.
2. It may provide protection against debt collectors
If you are unable to pay your overdue debts, Chapter 7 bankruptcy may be a useful tool to prevent debt collectors from pursuing you. When you file for bankruptcy, certain creditors may be temporarily barred from…
- Attempting to extort money from you
- Making contact with you
- Garnishing your wages
- Suing you or your property for the first time or continuing to sue you
3. With Chapter 7 bankruptcy, you may be able to pay off your debts more quickly than with Chapter 13 bankruptcy
Whereas Chapter 13 bankruptcy often takes between three and five years to complete, Chapter 7 bankruptcy typically takes between 90 and 100 days from start to finish, not including the time required to complete a credit counseling course prior to filing.
4. You will incur some financial losses
One of the most serious implications of filing for Chapter 7 bankruptcy is the potential loss of your property. Depending on the state’s rules and the extent to which you own equity in particular assets, your cash or property may be at risk.
5. Your credit score may suffer
The other significant ramification of Chapter 7 bankruptcy is the effect on your credit. Chapter 7 bankruptcy will remain on your credit reports for ten years from the date of filing.
This does not imply you will never be able to get a credit card or obtain a mortgage again; nevertheless, you may have to pay significantly higher interest rates and costs when borrowing.
Should I file Chapter 13?
Chapter 13 bankruptcy may be an option to consider if you own property that you wish to retain.
Consider the following points.
1. If your income is sufficient, you may be compelled to declare a Chapter 13 bankruptcy
To qualify for Chapter 7 bankruptcy, you must demonstrate that you are unable to repay your debt. If your current monthly income exceeds the state’s median income threshold for a family of your size, depending on your income and the state’s median income standards, you may be unable to file Chapter 7. In this instance, Chapter 13 bankruptcy may be the best alternative.
2. It has the potential to halt debt collection and the foreclosure process
If you’re a struggling homeowner, Chapter 13 bankruptcy may be the answer. Chapter 13 bankruptcy can halt the foreclosure process and provide you with an opportunity to make up for missed mortgage payments. Additionally, if you have debts that are being collected, any debts discharged in Chapter 13 prevent your creditors from attempting to collect the money from you.
3. It may assist you in repaying your debt
Chapter 13 bankruptcy may also be a more convenient and cost-effective method of debt repayment. Through Chapter 13, you’ll create a repayment plan for all or a portion of your debts. Depending on your repayment arrangement, you can make a single combined monthly payment toward your obligations. Your creditors will then get a portion of this lump sum payment. Monthly payments on some types of debts may also be lowered, allowing you to repay them over the length of your three- to five-year plan.
4. It may take between three and five years to pay off your obligations
While Chapter 7 bankruptcy may enable you to discharge your debts relatively fast, the same cannot be said for Chapter 13. Under Chapter 13 bankruptcy you are still responsible for your debt until your repayment plan is completed, which normally takes three to five years.
5. The repayment plan may put a pressure on your finances
You must pledge your disposable income for as long as the repayment plan is in place. However, this could put a big dent on your cash flow.
6. If you are unable to adhere to the repayment plan, you risk losing your Chapter 13 status and possibly even your possessions
If you are unable to make your plan payments, your bankruptcy case may be dismissed or transferred to Chapter 7, putting you back in danger of losing assets such as your home or car.
Additionally, your repayment plan may be dismissed or moved to Chapter 7 by the court if you fail to file appropriate taxes throughout your case or if you fail to pay domestic support responsibilities, such as child support and alimony, following your filing.
7. The repercussions on your credit may be less severe
As with Chapter 7, Chapter 13 bankruptcy can be extremely detrimental to your credit. Chapter 13 bankruptcy discharges can remain on your credit reports for up to seven years from the date of discharge. However, certain creditors may see a Chapter 13 bankruptcy positively in comparison to a Chapter 7 bankruptcy. This could indicate that you paid a greater portion of your debt.
Bankruptcy is a significant legal decision that has far-reaching effects. Consider all of your choices before declaring bankruptcy for debt relief. After you’ve weighed all of your options and chosen that this is the best course of action for you, the next step is to conduct study on Chapters 7 and 13.
If you’ve examined your situation and your options and determined that you are unable to repay your obligations, you should see an attorney to determine the best course of action for you.
Talk to a knowledgeable Raleigh, NC Bankruptcy Attorney about your bankruptcy case today!
At the Cameron Bankruptcy Law, you will work directly with a competent attorney to discover the best strategy to settle your financial troubles. We pride ourselves on delivering upfront and honest legal advice about personal and commercial bankruptcies under Chapter 7, Chapter 13, and other aspects of the Bankruptcy Code.
Get bankruptcy relief now! Don’t let a financial problem grow worse when aid is available. Schedule a FREE consultation with our compassionate consumer bankruptcy attorneys in our Raleigh, NC law office now.