Chapter 13 Vs. Chapter 7
HONOLULU CHAPTER 13 BANKRUPTCY ATTORNEY SERVING CLIENTS THROUGHOUT THE HAWAIIAN ISLANDS
For a few people, the bankruptcy means test will not allow them to discharge their consumer debt through Chapter 7 bankruptcy. For them, Chapter 13 is always an option. Although Chapter 13 requires a supervised repayment plan to your creditors, you shouldn’t think of it as bankruptcy’s little sibling. Chapter 13 offers some powerful benefits and advantages that are worth considering many of which are not available under Chapter 7.
EVERY FORM OF DEBT CAN BE INCLUDED, OFTEN RESULTING IN LOWER MONTHLY PAYMENTS
To begin with, Chapter 7 restricts the types of debt you may have discharged and exempted. Student loans, child support and alimony payments, for example, may not be discharged. By working with your creditors to design a restructured debt plan, most people are able to greatly reduce the interest amount, eliminate arrears and reduce the actual amount of the principal owed. Spread out over a three-year or five-year plan, people often save thousands of dollars, while keeping the equity in their home and cars.
CHAPTER 13: KEEP YOUR HOUSE, WHEN YOU MAY NOT BE ABLE TO THROUGH CHAPTER 7
If you have home equity that is not exemptible and you filed for relief under Chapter 7, you will be forced to sell your house to repay your creditors if the court determines liquidation of assets is in order. For most people that would be a deal breaker. However, in a Chapter 13 the trustee will NEVER sell your house. The Chapter 13 plan, however, to be confirmed by the court, would require that the unsecured creditors get at least as much from your repayment plan as they would have received from a hypothetical Chapter 7 sale.
STRIPPING OFF A SECOND MORTGAGE OR HOMEOWNERS ASSOCIATION FEES
If you are like millions of people over the past 10 years, you may have taken out a second mortgage on your home. As the Great Recession destroyed home values, however, the value of your property may be worth significantly less than the total amount you now owe. Chapter 13 bankruptcy allows you to strip off second mortgage to return your monthly payment to the amount of your original mortgage. Why? Because if the court ordered you to liquidate (sell) the property to pay off your creditors, there would be no money to repay that second mortgage or that AOAO after payment of the first mortgage.
Learn more about ways to Cram Down Your Debt
YOUR LIFE AFTER BANKRUPTCY
If you are very concerned about your credit rating and financial reputation after bankruptcy, Chapter 13 offers you the best option. By filing for Chapter 13, you are showing future creditors that you intend to repay your debts. While a Chapter 7 will remain on your credit report for up to 10 years, Chapter 13 may be removable after seven years. In addition, you will be eligible for filing another Chapter 13 in only two years from the date you filed the first Chapter 13. For Chapter 7, you must wait at least eight years before you will be eligible to file Chapter 7 again.
GET A FRESH START FOR YOU AND YOUR FAMILY — CALL US TODAY
The right bankruptcy lawyer can help you maximize the benefits of Chapter 13. We invite you to learn more about types of bankruptcy and ways we can help you get a brighter future, free from debt. No matter where you reside or operate a small business in the Hawaiian Islands, call or send a message to our office in Honolulu to schedule a free initial consultation. We will explain your options and help you see a brighter tomorrow.
