Today, most of the Bankruptcies filed in Minnesota are either a Chapter 7 or Chapter 13. Determining which chapter is right for you will depend on your specific financial status including your debts, assets and income. A lot of people have the option to choose between the two but if you have higher than median income for a household your size, you might only be allowed to file a Chapter 13. No matter the case both are excellent options for resolving unsecured debt. However, they are unique in their own way and offer a variety of different advantages. If you have the option to choose between the two it will be important to know the differences so that you can make the most attractive decision for you and your family.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is commonly referred to as the “Fresh Start” bankruptcy because it offers immediate relief and immediate fresh start. The day your Chapter 7 Bankruptcy petition is filed all of your creditors have to stop pursuing you. This means they can’t call you at work or on your cell phone, they can’t send you letters, garnish your wages or if you’re facing a foreclosure that must stop immediately. Also the Chapter 7 Bankruptcy Process is usually over and done with in only four months. So in less than four months you are going to receive a discharge and the discharge is going to work against all of your unsecured creditors. So if you have overwhelming credit card debts, department store card debts, repossession debts, medicals debts or broken leases the Chapter 7 discharge is going to alleviate you from all obligations to pay those and it happens very quickly!
Many clients who can choose which chapter to file choose to file a chapter 7 bankruptcy case. Chapter 7 is quicker, easier and you can recover more quickly from a Chapter 7 in terms of your credit. Chapter 7 debtors can qualify for some forms of credit shortly after they receive their discharge. If you obtain a store credit card after discharge, for instance, and use the card responsibly by charging and paying of the balance every month you will be able to improve your credit score back in no time.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is commonly referred to as the “Easy Re-payment Plan” because it takes a little bit longer to receive a discharge and you’ll have to pay the unsecured creditors pennies on the dollar. The Chapter 13 Plan last anywhere from 36 months to 60 months and that’s depending on your income. The discharge doesn’t come until you successfully complete the plan. However, for most people that have to file a Chapter 13 Plan there are huge advantages that come with it. A normal Chapter 13 plan has a payment to unsecured creditors of around 3-5% so if you have a 100K of debt you pay back 3% of that and the remainder of the debt is wiped away. Forever. Tax-Free!
Some clients prefer choosing Chapter 13 Bankruptcy over Chapter 7 because you have a lot more flexibility in Chapter 13 than Chapter 7. It’s possible to have to give non-exempt property to a trustee in a chapter 7 case. You don’t have to worry about this in a chapter 13 – debtors keep all their assets in a chapter 13 case. And a lot clients also feel better about paying back a percentage of their unsecured debt because it seems like if you pay back a percentage of your debt you are looked at more favorably.
How Do I Know If Chapter 7 or 13 Bankruptcy Is Right For Me?
Deciding to file bankruptcy can be a very tough decision but there are a couple big indicators that it is a really good option.
- If you’re considering using your retirement account to pay off credit card and medical debt. Your retirement account is 100% exempt in a Bankruptcy. This money is for you to live off after you retire not to make payments on unsecured debt that you can’t afford.
- If you have so much credit card debt that you won’t be able to pay it off for several years taking into consideration the interest. This will be an enormous amount of money that you will lose on top of the initial debt.
- If you are about to retire and your income is going to be reduced to the point that you won’t be able to afford to make payments on your unsecured debt. When you retire you do not want to have to deal with the overwhelming stress from aggressive credit and debt collectors calling and screaming at you for payments at all hours of the day.
- If your wages are being garnished or you about to lose your house in a foreclosure.
Why You Should Contact Me
Keep in mind I have a free, no-obligation bankruptcy consultation available by phone, skype of in-person at one of my 7 convenient MN locations. If you talk to me I will take as much time as you need to answer all your questions and make sure you understand all your options. When you leave this consultation you will have a really good understanding if bankruptcy is right for you and if you should pursue Chapter 7 or Chapter 13.
Contact me today. It’s easy! Click to sign up online or pick up the phone and call anytime. I have a live receptionist answering the phone and scheduling appointments for me 24 hours a day, 7 days a week.
