Financial hardship hits even the most accomplished people in the world. In fact, more than 75 percent of professional athletes face bankruptcy just two years after retirement, according to Sports Illustrated. Additionally, over 5 millions Americans, as of April 2012, had been unemployed for at least six months, leaving several people without a way to pay off their debt, maintain their homes, and provide for their families. In these unfortunate situations, many people turn to bankruptcy as a viable option to help cancel their debt.
Thousands of people file for bankruptcy every month in America, and some of the most common forms of personal bankruptcy filings include Chapter 7 and Chapter 13. There are some key factors that differentiate the two when looking at Chapter 7 versus Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, the court liquidates all or most of a person’s debt. Debtors must first pass a means test that proves that their income is less than the average income of a family their size in the state in which they reside. But in return, debtors usually have to give up their home, and the house is used in paying off creditors. Many debtors that face foreclosure because of missed payments turn to Chapter 7 bankruptcy to help waylay the foreclosure process by a few months. Once a home is foreclosed, it can be re-sold, with the average sales price going for more than $100,000 in states like Indiana. While filing does not preclude the chance that a debtor will lose his or her home, creditors are ordered to stop collecting payments while the court processes the bankruptcy approval.
Debtors can also try to file a Chapter 13 bankruptcy instead to prevent losing their home. When considering Chapter 7 versus Chapter 13 bankruptcies, Chapter 13 filings are less harsh on debtors, but require more from them. With a Chapter 13 bankruptcy, a debtor can pay their creditors back through a payment plan that is usually spread out in 3 to 5 years. Since the payments must come from a person’s personal earnings, an irregular or unsteady income could result in the court denying a debtor’s request to file a Chapter 13 bankruptcy. Additionally, there are requirements with the amount of unsecured and secured debt a debtor can have to be approved for this chapter filing.
With any bankruptcy case, there are a number of legal formalities that make it hard for the average person to file on their own. This is why many people turn to bankruptcy law attorneys to help them determine the right course of action. These lawyers can give debtors valuable bankruptcy tips and advice, answer key questions about Chapter 7 versus Chapter 13 filings, and help debtors decide which one is the right chapter to file for their situation. Financial hardship can hit at the most unexpected times, and you may have to face bankruptcy at some point, but a great lawyer can help you navigate the process, and get you back on the road to financial recovery. Visit here for more: koehlerbankruptcy.com