Bankruptcy, what are the pros and cons of Chapters 7 & 13?
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debandjc
I am looking for personal info from someone’s own experience or what you’ve heard. Other than credit damage, did you regret doing it? Also How long does it take, what does it cost and can you keep your car and IRA as that’s all I have of value. Feel free to answer if you know anything, just know I have checked out the different websites, so please don’t forward me a website address. I’m hoping to get an everyday person’s input..I’m confused and not sure which one (7 or 13) is the way to go, or to file at all. If I go 13, how much of a reduction in debt normall occurs and does it freeze the interest accruing? Thank you.
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I am looking for personal info from someone’s own experience or what you’ve heard. Other than credit damage, did you regret doing it? Also How long does it take, what does it cost and can you keep your car and IRA as that’s all I have of value. Feel free to answer if you know anything, just know I have checked out the different websites, so please don’t forward me a website address. I’m hoping to get an everyday person’s input..I’m confused and not sure which one (7 or 13) is the way to go, or to file at all. If I go 13, how much of a reduction in debt normall occurs and does it freeze the interest accruing? Thank you.
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October 27th, 2008 at 3:21 am
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They laws are complex and you should discuss these things with a bankruptcy attorney. Usually they have a FREE initial consultation.
You can keep your retirement accounts provided you have been contributing to them regularly for the last 12 months, or not at all for the last 12 months.
Dumping a huge amount into a retirement account to protect it just before filing bankruptcy is a no-no.
Chapter 7 liquidates all your assets to pay your debts, except what is exempt. What is exempt can vary with the state and local laws. It some states you can keep a lot more.
A no-Asset Chapter 7 case is one where the only assets available are those which are exempt, and you get to keep them them all. Nothing is liquidated. Your non-secured debts disappear.
Secured debts will require reaffirmation or repossession, except in cases of exemption.
Chapter 13 is more complex. It involves a reorganization of your debts.
You really need to visit a bankruptcy attorney. Even if you don’t file, they can help a lot.
October 27th, 2008 at 9:53 pm
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IRA’s and all other personal retirment accounts have been protected from creditors in a bankruptcy by the US Supreme Court.
Chapter Seven is the way to go if you qualify. Your debts are discharged without too much ado. There are exemptions provided by your state and the federal government which will allow you to keep most, if not all of your personal property.
Chapter 13 is a different story. This is a debt repayment plan. You are put on a strict IRS created budget and told how much of your income will go toward debt reduction.
If you earn over the median income of your state and can pay at least $6000 a year for five years you will be forced into Chapter 13. Creditors would like to see 30 to 50% of your debt repaid.
If you complete the repayment plan all other debts are discharged.
In both Chapters, your are likely be able to keep your car. You must now reaffirm debts you wish to keep with 45 days of filing. Of course you have to keep up with the payments.
Interest does not accrue in a Chapter 13 plan, once it is approved. However, if you fail to keep up the payments, you are in a worse position than before, unless you can convert to a Chapter 7.
Credit counseling is mandatory before a bankruptcy filing. The counselor will tell you which chapter you have to file under. If you have a simple Chapter 7, you could probably do it yourself. The going rate for a attorney is around $1000 depending on where you live.
Once you file and supply all the documentation, you need to attend a meeting of creditors. If no one objects, the discharge will come within a few weeks to a month.
I can’t answer the question as whether you will regret it or not, Social stigma is no longer attached, but credit will be expensive at first, and your ability to get a new job or apartment might be effected.
October 29th, 2008 at 12:04 pm
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I did 7 b/c didn’t want to keep house, my car paid off so no threat of losing that. If you want to keep those things then 13 for sure. Mine was all credit card debt and a really bad housing market(foreclosure) and a job transfer to another city -Just wanted to get rid of this burden It was my last resort, hated to do it but man the RELIEF! Chapt 13 keeps you in bankruptcy for 3 -5 years so you can not start rebuilding credit until you are out. With a 7 you are out within a few months to start rebuilding credit. Google ” life after bankruptcy ” and see how it is really not that bad- your credit is already bad isn’t it? -It was good for me once i decided to get a clean slate. Everybody is different, but you’d be surprised how many people have had no other choice, some abuse it — but really, for most of us, it is our last resort. Good luck –it all depends on what you want to keep that determines 7 or 13.