February 12, 2014 /24-7PressRelease/ -- Chapter 7 or Chapter 13 may be best for Washington residents in debt---
Article provided by Law Office of Kevin J. Magorien
Visit us at http://www.kevinmagorien.com
While the economy is slowly recovering, there are still thousands in Washington State and nationwide who are still caught in the lingering grips of the recession. If you are in debt, struggling to make your payments or not making them at all, bankruptcy might be the solution you've been searching for.
But which type of bankruptcy is right for you? Generally, there are two types of consumer bankruptcy, Chapter 7 and Chapter 13. Which is best for you depends on a number of factors, such as your income, assets and patience.
Chapter 7 offers quick discharge of debt
Chapter 7 bankruptcy is the most common form of bankruptcy for consumers. In a Chapter 7 case, your debt is discharged almost immediately. Not all forms of debt can be discharged; student loans, for example, generally survive a Chapter 7 discharge unless the filer can show that repayment of the student loans will cause "undue hardship." But, most types of debt, including medical debt and credit card debt, are discharged completely.
Chapter 7 is advantageous because it is quick, but it does have drawbacks for some filers. Specifically, liquidation is a part of some Chapter 7 bankruptcies.
Liquidation is the sale of nonexempt assets, with the proceeds of the sale going to partially repay creditors before debt is discharged. Liquidation is what many people fear about bankruptcy, that they will have to give up their possessions. However, there are generous exemptions under Washington State and federal law that allow filers to keep various kinds of assets up to a certain value, such as a motor vehicle, equity in a home and personal items. Because of the exemptions, many Chapter 7 filers do not have to give up any property at all.
Chapter 13 can help save your house from foreclosure
Chapter 13 bankruptcy may be a better option for filers who have a steady income and significant assets. In a Chapter 13 case, with help from his or her attorney, a filer makes a repayment plan that spans a three to five year term. The court must approve the plan. Under the terms of a Chapter 13 repayment plan, debts will be consolidated, and payments may even be lowered. If the filer lives up to the terms of the repayment plan, at the end of the three to five year term, most types of remaining debt are discharged completely. Chapter 13 cases generally do not involve liquidation.
Chapter 13 can be particularly useful if you intend to save your home from foreclosure. After filing for bankruptcy, an automatic stay goes into effect, which halts all creditor actions against you, including foreclosure. You can structure your Chapter 13 repayment plan to account for past due mortgage payments, and as long as you keep up with your mortgage payments over the life of the Chapter 13 plan, you can defeat the foreclosure action.
Chapter 13 may also allow you to keep property that you would lose in a Chapter 7. As long as you pay at least the non-exempt value of the property to your unsecured creditors over the three to five year term of the plan you may keep the property in Chapter 13. An example would be excess value in vehicles or a second home, which would be liquidated by a Trustee in Chapter 7. Under Chapter 13 you could keep these assets provided you repay this excess values over the term of the plan.
Talk to a Washington bankruptcy lawyer about whether Chapter 7 or Chapter 13 is best for you
If you need help deciding which type of bankruptcy is right for you, or if you would like to get your bankruptcy case underway, get in touch with a lawyer today. An experienced Washington bankruptcy lawyer can get you on your way to a fresh financial start, and will ensure that you get the most favorable bankruptcy terms possible.
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