The path to economic stability will depend on the type of bankruptcy for your situation. Both have benefits that could solve your financial problems, but what’s the catch?
Chapter 7 Bankruptcy
This is straightforward for those who don’t have a steady income. By choosing this option, you are telling the creditors that you can’t pay and won’t be able to in the future. However, you will have to surrender the nonexempt property to make up for the money you owe: cars, bank accounts, valuable items, etc.
The Pros for Chapter 7
– A bankruptcy trustee will assume complete responsibility for your debt.
– You won’t have to make payments.
– The debt will be completely erased in just a few months.
The Cons for Chapter 7
– You may lose your home if it has enough equity.
– You won’t qualify if your income exceeds the median.
– Your belongings are at stake.
Chapter 13 Bankruptcy
On the other hand, this form of bankruptcy lets you negotiate with creditors and set up a payment plan which lasts 3 to 5 years. If simply giving you more time to pay back the amount of money you owe can improve your situation, Chapter 13 is convenient. Keep in mind that this caters to individuals with a stable paycheck.
The Pros for Chapter 13
– You will keep your property.
– If you are falling behind on mortgage payments, it will prevent foreclosure.
– Loan cosigners are protected from all collection efforts.
The Cons for Chapter 13
– It will take longer to eliminate your debt.
– Your case will be dismissed if you don’t pay on time.
– Unexpected situations such as getting laid off will preclude you from keeping up with the monthly payments.
Which Bankruptcy option is the best?
Bankruptcy isn’t a process that you can research online and figure out by yourself. One small mistake can result in losing your assets and getting deeper in debt. Most bankruptcy cases fail due to a lack of guidance.
Our experienced attorneys at The Law Office of Erika Luna can determine which option is right for you as well as protect you from the pitfalls of filing for bankruptcy.