What Chapter Should I File?

There are two types of Bankruptcy that individual and/or married couples usually file. In a Chapter 7, you file your bankruptcy petition, and within a few months, as long as there aren’t any objections, your debts are discharged. In a Chapter 13, you file your petition and then begin making monthly payments to a trustee for 3-5 years. The Chapter 13 trustee takes your payment and uses it to pay creditors in the way that you designated in your Chapter 13 plan.

There are certain situations that a Chapter 13 would be most appropriate. They include the following:

  • You are behind on your mortgage payments and are facing foreclosure.
  • You have a second mortgage and the value of the home is not enough to cover the first mortgage.
  • You owe unpaid property taxes.
  • You owe certain taxes to the federal or state government.
  • You owe more on your vehicles than they are worth (there are some limitations for some   vehicle loans used to purchase a vehicle in the last 2 1/2 years).
  • If you would lose assets in a chapter 7 case because they are worth more than the exemptions allowed to protect them.
  • Your disposal income is greater than your living expenses (this may seem like a simple statement, applying the current bankruptcy law to determine your “disposable income” sometimes requires an in depth knowledge of the law and above average mathematical skills.

Bankruptcy will be listed on your credit report for 10 years if you file a Chapter 7 and typically 7 years for a Chapter 13. In both Chapters; however, you have the ability to rebuild your credit long before the bankruptcy is removed from your credit report. Filing Bankruptcy should never be taken lightly. It is best if you consult with a professional who understand the bankruptcy law and how to best apply it to your unique circumstance. For more information or to schedule a free consultation please contact Orville & McDonald Law today at 607-770-1007.

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