Chapter 7 and 13 are the most popular consumer bankruptcies. However, there are pros and cons associated with each one. First, Chapter 7 goes through the bankruptcy court very quickly. In fact, the bankruptcy is usually discharged in about five months. Chapter 7 is a liquidation bankruptcy and assets are sold to pay debts. In order to file, individuals must pass the means test. This means they do not make enough money to repay their debt. Further, debtors are not entitled to a cram down on secured loans.
The Bankruptcy Attorney In Tacoma Wa explains the cram down process. For example, the debt on a house may be more than it is worth. Sometimes, the mortgage company accepts less to get some of the money back. Car dealers are often willing to do the same. Indeed, the biggest advantage of Chapter 7 is being able to start fresh a lot sooner. Chapter 13 filers have to wait several years for a bankruptcy to be discharged. Additionally, filers must have a regular source of income and pay a portion monthly to the bankruptcy court. The bankruptcy trustee uses the money to pay the consumer’s debt.
By paying the debt, Chapter 13 filers get to keep secured property like houses and cars. However, they must pay current notes in addition to the monthly payment. Often, the payment is a large portion of the debtor’s disposable income. The Bankruptcy Attorney In Tacoma WA works with the trustee to obtain a lower payment. However, they may not win the argument. Therefore, Chapter 13 filers must be prepared to live frugally for a few years.
The bottom line is that both Chapters have value. For instance, when any bankruptcy is filed, collection activities must cease. Hence, debtors get a breather from harassing phone calls and letters. Further, individuals have the chance to start fresh and see daylight at the end of the tunnel. Bankruptcies stay on the credit report for some time. Nonetheless, people report receiving fresh offers of credit within a few months. Hopefully, the debtor thinks twice before accepting. It is important not to get deep in debt again.