For those with uncontrollable debt and little assets, filing for bankruptcy can be a viable option to get their head above water again. Chapter 7 and Chapter 13 are the two types of bankruptcy petitions usually filed by individuals. While the specific processes involved with each of the two types have distinct differences, they both are meant to achieve the same end: debt relief for individuals.
With a Chapter 7 bankruptcy filing, there is no plan for repayment of debt. The bankruptcy trustee will sell the petitioner’s nonexempt property and assets and use any proceeds to pay creditors, per the U.S. Bankruptcy Code provisions. Whatever debt that is left over is discharged.
With a Chapter 13 bankruptcy filing, the petitioner proposes a repayment plan to pay off their debt. The plan should show the installments that will be made over a three to five-year period. Whatever debt is left over after that period is over will be discharged.
What Debts Can Be Discharged?
The types of debt that can potentially be included in your petition for bankruptcy include:
- Home mortgage: If you do not wish to surrender your home to satisfy your debt, you may be able to claim it as property exempt from being surrendered, or you could enter into a new repayment plan to pay off your mortgage according to new terms. You may also have alternative methods of foreclosure defense.
- Car loan: Like your home, you can choose to surrender your vehicle to satisfy your loan or try to enter into a new payment plan to pay off the debt over time. Again, a primary vehicle may be claimed by the petitioner as an exemption in order to avoid being forced to surrender it.
- Credit card debt, medical bills, utilities: Each of these is a type of unsecured debt, which means there is no property tied to it that can be surrendered or returned. In certain situations, it would be up to the trustee assigned to the bankruptcy case to take the petitioner’s assets into account and attempt to pay off his or her creditors accordingly.
Contact a Bankruptcy Law Firm Today
If you are considering filing for bankruptcy or are curious if filing for bankruptcy would be a good solution for your financial problems, it is best to consult with an experienced bankruptcy attorney. Bankruptcy law can be complicated and if any mistakes are made during the filing, it can cause the court to dismiss the petition. This is why anyone who is considering bankruptcy should consult with an attorney who deals specifically with bankruptcy and is well versed in the ever-changing laws of bankruptcy.
If you are facing financial difficulties, bankruptcy may be the best option for your situation. To learn more, call an experienced attorney, like a Chicago bankruptcy lawyer from a law firm like Therman Law Offices, LTD.