Filing Chapter 13 Bankruptcy
Filing chapter 13 bankruptcy is usually one of the last resorts for those facing debilitating financial circumstances. It is generally the last thing anyone wants who has tried to protect their financial investments, credit histories and future fiscal stability. However, there are times when choosing to use the protection provided through a chapter 13 bankruptcy filing may be the right move in order to stop the snowballing effect of clamoring creditors and foreclosures. For whatever reason a person finds himself in the paralyzing position of burdensome debt and crushing pressure, there are solutions that can be employed to regain security, restore credit and remove obstacles that hinder a prosperous future.
Many people find themselves dealing with unforeseen circumstances such as long-term illnesses, employment lay-offs or personal tragedies such as divorce. Sudden tragedies can alter the fiscal status of a family very quickly and send the family finances spinning out of control. In order to regain control and to alleviate the pressure caused by defaulted payments and persistent creditors, many consumers have had to consider using the legal measures provided through bankruptcy court. There are two types of legal fillings that can be made through the courts that address individual issues. Chapter 7 and chapter 13 bankruptcy has been set up by law to provide a system of repayment to creditors as well as financial protection for consumers who are trying to rebuild their crumbling finances.
Chapter 7 applies to the liquidation of assets in order to repay creditors while also imposing an automatic stop on collections until the court instructions are carried out. This allows creditors to receive at least some of what is owed them while also protecting the consumer from accruing more financial problems. Chapter 13 bankruptcy filing is a reorganization of finances on behalf of a consumer in order to repay debt as well as provide protection for some of their property such as a personal home. In this case, a consumer files a reorganization strategy to the court that agrees to legally appointed oversight of a personal budget and any liquidation of assets that are deemed reasonable.
The benefits of filing chapter 13 bankruptcy often outweigh the chapter 7 alternative in that some assets may be retained, a repayment plan is implemented and it is usually paid off in up to 5 years, if not sooner. Some debt is required to be paid off completely, some may be paid off by a percentage of the total debt and others may be forgiven. There is a mandatory budget required by the courts when a chapter 13 bankruptcy is filed that must be followed to the letter. A plan for repayment is set up that may include wage garnishments and management of how a person can spend his or her money during the repayment plan. An appointed representative of the court will be provided that oversees transactions and makes sure that creditors are repaid on a schedule according to the earnings of an individual.
For those who carefully follow the repayment process as outlined by the court as a result, debt will be resolved and many creditors will be willing to extend credit again. This type of court managed financial resolution is more appealing to creditors and lenders which will be useful to those who are committed to restoring their future options. Consumers who file chapter 13 can expect to have it show up on the credit history for at least 6 years. It is less damaging for credit purposes than for those who file for chapter 7 bankruptcy, in that these cases usually receive poor credit standing for 10 years following court proceedings. Although filing chapter 13 bankruptcy allows greater protection for assets and offers a payment plan for creditors, there are some debts that cannot be forgiven by law. Alimony, back taxes, child support, any hidden debts not reported at filing and most student loans are some of the areas that are required to be repaid no matter what the situation.
Most individuals who are considering which avenue to take, prefer chapter 13 because of the shorter penalty on their credit history, greater protection for assets and court imposed solutions for repayment to creditors. While this option may be a bit more appealing, choosing chapter 13 bankruptcy is not a magic bullet for clearing up troubled, personal finances. If possible, it is always best to manage personal finances with commitment to fiscal freedom and integrity. There are, of course, times when no matter what a person does, tragedy strikes. When it does, only God and good, personal choices based on biblical principles can bring anyone out of the stress and pain of imminent financial ruin. "The young lions do lack, and suffer hunger: but they that seek the Lord shall not want any good thing." (Psalm 34:10) While filing chapter 13 bankruptcy may not be the first choice for fiscal resolution, it may be a solution that can provide a plan and give hope for a stable, fiscal future.
Filing Chapter 7 BankruptcyFiling chapter 7 bankruptcy is a fairly common occurrence among a large segment of society who is generally desperate to find relief from overwhelming financial debt. Up until recent legal changes to laws governing this action, chapter 7 was the most typical of the federal statutes to be used by individuals. Current laws have made it very difficult to receive approval for the application of this statute and many cases are referred on to the chapter 13 process. The process and results for chapter 7 bankruptcies are fairly simple and straight forward with a general fee of $200 for filing and an average wait of up to five months for resolution.
Known as the 'straight' bankruptcy statute, this legal transaction generally wipes most debts out in return for declaring some personal property for liquidation in order to repay debts. If an individual, however, lives in a state that adheres to property exemption laws, he or she will receive protection from mandated liquidation of assets. States such as Texas offer this protection for its citizens which gave rise to the recent legislation that requires that all applicants must be a resident of any state before benefiting from its exemption laws. Anyone who attempts to move across state lines before the process will not receive that state's exemption status.
In order to file for chapter 7 bankruptcy, several forms and a petition must be filled out in order to begin the process of court approval. Lots of information is required in order to proceed with the petition such as present income, expenditures over the last two years, property bought and sold, assets that will be claimed by the applicant after the petition is filed and any property that may have been given as a gift in the past two years. A thorough assessment of personal assets, liabilities and earnings are very important to the court especially since the new laws have gone into effect. No longer can a person run up credit on luxury items within the previous 60 days before the petition is filed without paying for the items.
Many lawmakers have seen an abusive trend of prior laws that allowed people to indiscriminately run up credit cards, buy cars, purchase plane tickets, take luxury vacations and receive cash advances just before filing for chapter 7 bankruptcy. This has left many creditors holding the bag for products that will never be paid for by individuals who calculated their times of purchase to coincide with court mandated restrictions of credit collections. Other abuses have been common for years that range from poorly managed finances and unreasonable investments that may not have had to occur with proper money management. While many people legitimately qualify for bankruptcies as a result of difficulties beyond their control, the misuse of the system spurred changes to chapter 7 bankruptcy laws that has made it harder for those who attempt to manipulate the system for their own purposes.
Historically, filing for chapter 7 bankruptcy has been a last resort for most people and was enacted by the courts to provide a second chance to those who are under extreme financial duress. In an attempt to continue with the legal tradition of assisting unfortunate individuals with financial problems, those who do not qualify for chapter 7 bankruptcy are assigned the status of a chapter 13 petition. Those who seriously want to dig their way out of fiscal hardships will find that while chapter 13 does not immediately wipe out debt, it does provide for measures to get debts under control, handle money wisely and have a positive financial future. This type of petition calls for a reorganization of debt and finances rather than a 'straight' bankruptcy.
Creditors are put on hold from collections, credit counseling is mandated, a household budget is imposed and a plan for repaying creditors within 3 to 5 years is implemented. For those in this situation, a court appointed overseer of financial matters that relate to each case is part of the legal statute. Those who file for a reorganization of financial responsibilities and follow the stipulated plan for repair can expect to be out of debt no later than 5 years and will only have poor credit following them for approximately 6 years. While filing for chapter 7 bankruptcy may at first glance seem an end all solution to serious debts, a poor credit history will follow a petitioner for up to 10 years.
This makes it difficult to receive approval for mortgages, leases, personal loans and other needed credit. Some even question the integrity issues involved with those who file chapter 7 bankruptcy and do not attempt to settle with or repay creditors at least a portion of what they have owed. "Whoso walketh uprightly shall be saved: but he that is perverse in his ways shall fall at once." (Proverbs 28:18) The integrity of a person will generally determine the end results of a good or a poor standing before God and man in financial matters. When considering options for fiscal relief, always check with several sources for comparative and thorough information that can help in making decisions that will affect the future.