Overwhelming debt is a problem for many Floridians. This could come about because of sudden medical expenses, job loss, divorce, a business closing or from credit card bills. Regardless of how it happened, the worry they face can leave them fearful and wondering about the future.
Along with the inability to make the monthly payments and anxiety about potentially losing everything, a common concern is the relentless calls and messages from debt collectors pursuing payment. Many people do not even consider the prospect of bankruptcy because of the misconceptions surrounding it. In truth, it is a useful way to clear debt. One aspect that debtors should weigh is which chapter is better for them.
Chapter 7 vs. Chapter 13: which is preferable based on circumstances?
When filing for personal bankruptcy, debtors need to determine whether Chapter 7 or Chapter 13 suits their situation. Chapter 7 is a liquidation bankruptcy where a person’s valuable property will be surrendered to a trustee and sold to pay back creditors.
There are some properties that will be exempt. Examples might be tools that a person needs for work or an automobile they must retain for their job. Often, people do not have any assets that will be liquidated, so they can receive a discharge and move forward.
Chapter 13 is for those who have regular income and own property they want to retain. If a person owns a home and is behind on their mortgage, Chapter 13 could help them catch up to what they owe and possibly keep the property.
It is like a consolidation loan. Over three to five years, they will send payments to a trustee. The trustee will, in turn, send a certain amount to creditors. This could reduce what the person owes. The court must approve the repayment plan and the payments must be made on time and in full.
People who do not meet the requirements under the means test for Chapter 7 might be able to use Chapter 13 instead. Under both chapters, once the discharge is granted, the person will no longer be responsible for the debts.
When thinking about bankruptcy, it is useful to have help
Bankruptcy is beneficial in myriad ways. It can help people get rid of massive debt, let them restart their financial lives and retain properties. They will no longer need to avoid debt collectors and wonder how they will make their minimum payments every month.
Still, there is nuance to the process and having advice from the start can be crucial to deciding which chapter suits their needs. Calling for advice from experienced bankruptcy professionals can be essential to making the right choice.