Which Chapter to File?

Counseling Fort Lauderdale Residents in Bankruptcy MattersBankruptcy Chapter

Filing for bankruptcy sometimes means you have to choose between seeking protection under Chapter 7 or Chapter 13 of the Bankruptcy Code. Both types of bankruptcies give you the opportunity to make a fresh start financially, but each has a different approach to getting you there. The bankruptcy lawyers at Anidjar & Levine offer thorough representation to people pursuing bankruptcy proceedings in the Fort Lauderdale area. We can help you decide which type of bankruptcy is right for you.

How to Choose Between Chapter 7 and Chapter 13

Under both Chapter 7 and Chapter 13, you will immediately benefit from the automatic stay rule. With the automatic stay, creditors can no longer make attempts to collect on a debt and must cease any collection activities, including wage garnishment.

In deciding which Chapter to file, it is important to consider a number of factors, including:

  • Your income, and whether you have the means to make at least partial payments to your creditors;
  • Your property, including the amount of equity you have in your assets and if you want to keep non-exempt property; and
  • Your debts, such as the types of debt you have and whether paying them over time may be a better way to manage them.

It is important to remember that neither Chapter 7 nor Chapter 13 will discharge all of your debt. Certain debts are non-dischargeable, such as child support, and you will have to pay them regardless of the type of bankruptcy you file. However, by reducing your overall debt, both Chapter 7 and Chapter 13 will make it easier for you to pay your non-dischargeable debts.

Filing for Bankruptcy under Chapter 7

Many individuals prefer Chapter 7 bankruptcy over Chapter 13 because of its speed and the elimination of unsecured debt. Chapter 7 is commonly known as a liquidation bankruptcy, and it typically takes between three and six months to complete. A court-appointed bankruptcy trustee will sell your non-exempt assets and use the proceeds to pay your creditors. In most cases, the proceeds from the liquidation will not cover all of your debt. However, Chapter 7 discharges any remaining qualifying debt. This means that you are no longer obligated to pay your unsecured debt once bankruptcy is complete.

Not everyone can file for this type of bankruptcy. Since Chapter 7 wipes out a large amount of debt, people planning to use it must pass a “means test” to prevent individuals who can pay back some of their debt from eliminating it altogether. If you are unemployed or have low income, and do not have a substantial amount of property you wish to protect, Chapter 7 bankruptcy may be a good option.

Seeking Protection under Chapter 13

If you have a stable income, you can reorganize your debt under the Chapter 13 procedure. You will make monthly payments to a trustee, who will then pay your creditors. Your monthly payment amount will be tied to your disposable income. Chapter 13 typically lasts three or five years, so you must have both the financial means and commitment to make the monthly payments under your plan.

For individuals who are not eligible for Chapter 7, Chapter 13 may be the only option. However, you should consider Chapter 13 if you wish to keep your property, even if you are eligible for Chapter 7. For example, under Chapter 13, you can avoid foreclosure by paying for arrears over time while keeping up-to-date with your mortgage payments. If you have second or third mortgages, it may be possible to convert these debts into unsecured debt through lien stripping in Chapter 13. You can also keep non-exempt property as long as you pay your creditors the equivalent of the property’s value as part of your repayment plan.

Providing Diligent Bankruptcy Representation in Hollywood

When you file for bankruptcy, choosing between Chapter 7 and Chapter 13 is a crucial decision. The Hollywood bankruptcy attorneys at Anidjar & Levine are prepared to assist you if you are facing this crossroads. We can assess your financial situation and advise you on whether Chapter 7 or Chapter 13 bankruptcy is more likely to suit your goals. Our lawyers help clients throughout South Florida get their lives back on track. For a free consultation, call us at (800) 747-FREE or fill out our contact form today.