The huge financial crisis has forced many people to look for various means of obtaining goods and services at lesser rates. People are facing severe debt over burden which is the main reason of more and more people filing bankruptcy to get rid of their debts. There are two types of consumer bankruptcies to choose from as per the requirement of individuals even though mostly people look for the one which would be the least expensive.
When compared, it has been seen that most of the people opt to choose chapter 7 bankruptcy over chapter 13 bankruptcy the reason being that one can avoid paying off the debts in chapter 7 bankruptcy whereas a minimum of 10 cents a dollar has to be paid in case of chapter 13 bankruptcy.
Bankruptcy chapter 7 or liquidation bankruptcy involves liquidation of the debtors taxable property and the amount of money gathered from the liquidation is disbursed among the creditors as per the ratio of the debtors debt to each one of them. Some of the assets are partially exempted and some other facilities like insurance for unemployed, pensions, alimony etc are exempted. The debtors might include some of his other assets to a specific extent under wild card to save it from liquidation. After filing bankruptcy 7, all of the unsecured debts of the debtor are permanently discharged and he is no more hold accountable for them but he has to build up his credit score from the scratch and has a fresh credit history.
Bankruptcy chapter 13 or wage earners bankruptcy is for people who are salaried and wish to pay back the creditors as per their ability. It involves distribution of the debtors salary after taking out his essential expenses. The debtor gives a total approximate monthly income and a list of his essential expenses to the court which then revises the expenses and income and decides how much has to be given to the debtor to carry out his monthly expenses and how much would be disbursed to the creditors every month as per the ratio of the debt. Chapter 13 bankruptcy is generally not preferred by most people as it forces them to choose the living standard decided by the court. It is always advisable to go ahead with
debt settlement rather than filing bankruptcy chapter 13 as both works in the similar fashion but
debt settlement is far more flexible and does not force any one to alter their life style drastically.
Chapter 7 bankruptcy is definitely the more inexpensive option for filing bankruptcy as it is easy and convenient and discharges most of the debts of the debtor however there are some of the non dischargeable debts which has to be paid
off even after filing chapter 7 bankruptcy. Once the debtor files for chapter 7 the court gives an automated stay order which prevents the creditors from possessing the debtors property without the courts consent. The creditors are paid money as per the federal bankruptcy law however there is always a chance for the creditor to not get paid if the debtor does not have any exempted property and is considered under no assets case. Exemption of a part of the debtors property varies from state to state under state law of exemption.
Nevertheless bankruptcy, whether chapter 7 or chapter 13 leaves a deep scar on your credit report and your social and professional image hence it should be considered when no other debt relief option works out for you. It is always advisable to consult a bankruptcy attorney to get a clear estimation of your financial situation and acceptance of the after effects of filing bankruptcy, if you are considering this option to get rid of your debts.
