Filing for Bankruptcy - Difference with Chapter 13, 7

Filing for Bankruptcy - Chapter 13 and 7 Differences

Bankruptcy has long been an option for those struggling with their debts. Although not always the best option, it did serve a purpose for many. Now there has been some new bankruptcy laws have been put in place. What you should know about these and what it will mean to those considering bankruptcy. Here is a basic summary.
There are 2 basic types of bankruptcy, Chapter 13 and Chapter 7. Chapter 13 essentially helps the debtor repay some or all of their debts owing. How does this sound like bankruptcy you ask? Well, with Chapter 13, it allows someone with a house to save it from foreclosure. Albeit they still need to continue making those mortgage payments. Chapter 13 bankruptcy has similarities with a debt consolidation loan too in that it they can make payments to a Bankruptcy trustee who then pays off their creditors. Chapter 7 on the other hand is the most often chosen. If you declare Chapter 7 bankruptcy your debts are gone, but good luck obtaining credit for several years to come.

So what do the new bankruptcy rules mean? For one, people determined to have higher incomes will not be eligible to file for Chapter 7. This is figured out by comparing your monthly income to the average income of someone with your household size in your same state. If you make more than what most do, you will have to jump through more loops in order to be allowed to file for Chapter 7. The idea here is to get people who have the money to file for Chapter 13 instead of Chapter 7 thus paying some or all of the debts back. Chapter 13 filers will also have higher amounts of their disposable income to dish out as well.
In order for you to file for Bankruptcy of either kind you will also be required to do some credit counseling. Although you don't have to necessarily go along with what they advice, the purpose is that it might help out some and educate them on how to better handle their finances. It may even be obvious that you could only file for Chapter 7 but you still have to go through it. And as a result of the new Bankruptcy rules it becomes more expensive for lawyers to take on bankruptcy cases since there are more hoops to jump though.