Sometimes things happen, and you can no longer pay your debts. While you have several options available to you, it is sometimes easier to get a fresh start by filing bankruptcy. Once you decide to file bankruptcy, you have two options: Chapter 13 reorganization and Chapter 7 liquidation. The method you choose depends on your individual situation, including how much money you make, what assets you have, and how much your assets are worth.
If you feel you are drowning in debt, whether because you made a mistake, you lost your job, or you had a medical emergency, contact an Atlanta bankruptcy lawyer for a consultation to discuss your options.
What is Chapter 13 Bankruptcy?
If you want to keep more of your property, including real estate with a lot of equity, you are usually better off filing Chapter 13. Reorganization gives you a chance to pay your debts over time while discharging certain bills such as medical expenses or credit cards that got out of hand. When filing Chapter 13, you must file a plan with the trustee. The plan categorizes your assets into types and determines how much you can pay toward each type of debt.
If you choose to file Chapter 13, you must have extra money to make a monthly payment to the bankruptcy trustee. Certain debts get paid first and usually in full, including taxes, child support and arrearages on secured loans, such as a mortgage. During the Chapter 13 bankruptcy, you must make your regular monthly mortgage payment on time each month.
Chapter 13 generally lasts for three or five years, depending on your income and other factors.
What is Chapter 7 Bankruptcy?
Chapter 7 is a bit simpler in that you don’t make payments on old debts. The trustee liquidates everything that is not exempt, including your home. If you have too much equity – more than the allowed exemption amount – you could lose your home if you file Chapter 7. As with Chapter 13, the exemptions cover several categories. You can keep the property that falls within those exemptions.
The trustee liquidates the rest of your assets to pay as much as possible on your outstanding debts. The court can discharge your Chapter 7 bankruptcy in as little as 90 to 120 days.
Why I Should Convert to Chapter 7 Bankruptcy
You might start with Chapter 13, then want to convert to Chapter 7. You can do this by filing a motion with the court. People might convert from chapter 13 to Chapter 7 if they can no longer make the payments to the trustee because they lost their job or had a medical emergency.
If you file Chapter 13 and then put a plan together, then decide that you cannot pay the amount in the plan even though you are still working, you could convert to Chapter 7. Or, if you file, then in a month, decide that you are still having trouble paying your mortgage payment, you could convert to Chapter 7 – but keep in mind that you might not be able to keep your home.
Contact an Atlanta Bankruptcy Lawyer
Bankruptcy is often complicated, especially when you have real estate with equity or a lot of assets – more than you can exempt. Always speak to an Atlanta bankruptcy attorney regarding your finances to learn more about your options and whether it is better to file Chapter 13 or Chapter 7. It is almost always better to file Chapter 13 if you have assets, including equity in your home, but if something happens that prevents you from making the payments, you can always convert to Chapter 7. Fill out an online contact form or call us at (770) 488-9302 for a bankruptcy consultation.