When you file for personal bankruptcy, your 2 options are Chapter 7 and Chapter 13. Chapter 7 enables you to erase your debts, and Chapter 13 will set up a repayment plan to your creditors. I would recommend you to file Chapter 7 if possible; you will be able to financially recover more quickly than with Chapter 13. Here are some details in regard to filing bankruptcy:If the majority of your debts are result of a failing business, such as a failed small business, or a business that handled your rental properties, etc, you automatically qualify for Chapter 7 personal bankruptcy. If you own property that has any value, such as a motor home, or a vehicle that you is not your primary transportation, "collectors cars" you will probably have to relinquish that property in a Chapter 7 filing. A Chapter 7 filing to discharge is pretty short, generally 90 days. A Chapter 13 filing to discharge date will be 3-5 years, depending on what the court determines. If you own rental property, and don't reaffirm the rental property to the court, you will lose that property to the bank. You will not lose your personal residence in a Chapter 7 filing if you reaffirm it with the court and become current on the payments. If you are in a situation where you cannot become current on the back payments, you will have to file Chapter 13 to be able renegotiate your mortgage. Consult a bankruptcy attorney for greater details with your situation. Everyone has to take a "means test." This is where the percentage of your payments and monthly income is over your state's median percentage, than you will be forced to file Chapter 13. Chapter 13 is a repayment plan to your creditors, and requires you to repay your debts during either a 3 year or 5 year time frame. It will be one payment to the court, and they will disperse it to your creditors. Now, your Chapter 13 payment may or may not be less than the monthly debt payments that you already make. A Chapter 13 bankruptcy is not discharged until you've completed your repayment plan. You will be unable to refinance or get a new mortgage until 2 years AFTER your discharge, don't plan on doing it for 5-7 years. If you facing foreclosure, Chapter 13 will allow you to be able catch up on your payments a over time periods. Outstanding Federal or State tax bills or liens will not be discharge in a bankruptcy. For a Chapter 7 bankruptcy, you will not be required to make any more payments until your discharge is complete. For a Chapter 13 bankruptcy, it may possibly become part of your repayment plan to the court. Student loans will also not be erased in a bankruptcy. If they could, everyone would file bankruptcy when they finished school.
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Everyone's situation is unique and these are very basic advantages and disadvantages. Please contact a bankruptcy attorney licensed in your state for them to advise you of your situation.
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