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Should I file Chapter 7 or Chapter 13 bankruptcy?

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Should I file Chapter 7 or Chapter 13 bankruptcy?

Written by Charles Newland on . Posted in Bankruptcy

As an attorney could confirm, filing Chapter 7 bankruptcy is a common choice for people in Lake County. However, it may not always be the optimal decision. Several factors can help determine whether Chapter 7 or Chapter 13 bankruptcy is the more favorable debt relief option.

Determining eligibility

In some cases, income decides whether a person can file Chapter 13 or Chapter 7 bankruptcy. Under federal law, to qualify for Chapter 13 bankruptcy, consumers must have enough reliable income to complete a repayment plan. Relatedly, people with expendable income above a certain level may not be eligible for Chapter 7 bankruptcy, unless they demonstrate extenuating circumstances.

If a person’s income exceeds the state average, a bankruptcy court will consider the person’s monthly expendable income over the past five years. If this income surpassed $12,475, the court may convert the person’s case to a Chapter 13 filing. This also is true if a person’s monthly disposable income over the same period exceeded $7,025 and represented more than one-quarter of the person’s unsecured debt.

Additional considerations

For some consumers, filing Chapter 7 bankruptcy may provide a simpler, more efficient option. As a Lake County bankruptcy attorney could explain, this chapter can offer the following benefits:

  • Early debt discharge — consumers do not directly repay any debts during Chapter 7 bankruptcy. After asset liquidation, certain unsecured debts, such as medical and credit card debt, may qualify for discharge.
  • A faster process — Chapter 7 proceedings do not involve repayment plans. Therefore, these cases may be completed more quickly than Chapter 13 cases.
  • Protection of certain property — consumers can exempt certain personal items from liquidation. Therefore, filing Chapter 7 bankruptcy won’t necessarily result in the loss of all personal property.

In some situations, however, filing Chapter 13 bankruptcy may be advisable. People who want to consolidate non-dischargeable debt or make their payments toward secured debts current can do so through Chapter 13 bankruptcy. Filing Chapter 13 bankruptcy can ensure that no personal property is lost during bankruptcy proceedings. People who are cosigners on debt also may want to avoid filing Chapter 7 bankruptcy, as this may lead to creditors pursuing recourse from other signers.

People considering filing any chapter of bankruptcy in Lake County should first meet with an attorney. An attorney may be able to assist a person in assessing each option and identifying the optimal one.

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