Under bankruptcy laws a person that is hiring a lawyer must fill out a worksheet that determines what type of filing they can qualify for. Depending on the outcome of the worksheet, which is designed to determine a person’s income and ability to make payments toward their debt a lawyer can file for Chapter 13 or Chapter 7 bankruptcy.
The difference comes down to the supporting evidence that suggests a person has some money left over after they pay their monthly living expenses. If there is a deficit or the money going out is not enough to pay for food and utilities the attorney can recommend a Chapter 7 discharge of the individual’s debts.
- After being filed a Chapter 7 case may be dismissed in as a few as 90 days clearing all of the bad debts that the person has and is unable to pay, but in order to take advantage of having all liens and loans discharged from their credit report the individual is not allowed to hold onto any property that is being paid off by their delinquent loans.
- That means cars have to be turned over to the bank and a house must also be vacated to satisfy the conditions of the bankruptcy.
- Starting over with what they own outright a person that files Chapter 7 bankruptcy can leave their debts behind, but they also may have nothing of their own left after their case is discharged by the court.
- Under a Chapter 13 filing the bankruptcy lawyers are able to negotiate a low settlement of the debts and collect a reasonable monthly payment that is distributed to the individual creditors that are owed money.
- By setting up a scheduled repayment plan and working within the budget of the person that is filing for bankruptcy a person that is clearing a large portion of their debt can make the keep the items that they are buying on credit and make their payments more manageable to meet their current level of income.