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A person’s assets dictate which chapter of bankruptcy to file
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A person’s assets dictate which chapter of bankruptcy to file

On Behalf of | Jul 14, 2021 | Bankruptcy & Asset Protection

Floridians who are confronted with overwhelming debt may not know where to turn to get into a better financial situation. The accumulation may have come about for many reasons whether it is medical expenses, lost employment, the closing of a private business or using credit cards to stay afloat. Many will attribute these challenges to the crisis that began in early-2020. Of course, that has contributed mightily to financial woes. Regardless of how it came about, it is critical to understand that there is a path forward. If bankruptcy is the preferable alternative, there are key fundamentals such as which bankruptcy chapter is best based on an individual’s circumstances.

The role assets play in deciding whether to file a Chapter 7 or Chapter 13

Individual debtors need to look at their assets before filing. It is imperative to note the differences between a Chapter 7 liquidation and a Chapter 13 payment plan. For those who do not have substantial assets or own property like an older motor vehicle with a value that falls under a certain level, Chapter 7 may be the best option because it clears all unsecured debt while allowing the debtor to keep those properties. Dischargeable unsecured debt includes credit cards and medical expenses. For people who do have property that has value, the case trustee will take over the assets, cash them out and distribute it to creditors. Those filing for Chapter 7 generally will not have major assets to sell and the discharge can be achieved in a relatively short time.

If a person has a home, an automobile and other properties of value, then Chapter 13 is probably a better choice. Although the debtor will be required to make payments for three to five years to the trustee who will in turn distribute payments to the creditors, it does allow for the person to retain those properties. This is contingent on the payments being made on time and in full. Chapter 13 is like a consolidation loan where the debtor pays what he or she can afford and, once the process is completed, receives a discharge and can move forward without surrendering the properties.

Having advice can be useful in determining whether Chapter 7 or Chapter 13 is wiser

Once a person has decided that bankruptcy is the most beneficial strategy to getting rid of debt and starting over financially, it can be difficult to know whether to file for Chapter 7 or Chapter 13. It is useful to have experienced guidance from the outset to make these life-changing decisions. Consulting with experienced professionals can guide a person through the process and help with a positive outcome.