As an Asheville bankruptcy lawyer, I recommend filing bankruptcy cases to clients when I feel it will improve their financial condition. Chapter 7 and Chapter 13 both have advantages and disadvantages. My job is to explain to clients which financial tool will help them more, and recommend a path forward based on the specifics of their situation.
In Chapter 7 bankruptcy, clients petition the court to discharge debts in a liquidation bankruptcy. For many clients, this works great, because we can protect all of their property by utilizing the proper exemptions – there is no property for the trustee to liquidate at all. This means over 95% of clients who file for Chapter 7 relief get to keep all their stuff while discharging their debts in a short, roughly 3 month process. During an initial consultation, I examine whether a potential client qualifies for this type of relief by looking at their household income and expenses. I’ll also figure out if we are able to protect all their assets such as their house, car, bank accounts, etc. Chapter 7 delivers a financial “fresh start” quickly, eliminates credit card, medical, and personal loan obligations, and wipes the slate clean on old debts.
In Chapter 13 bankruptcy, clients propose a payback plan to the court where they back a portion of their debts over a 3 to 5 year period. The amount required to be paid back to creditors depends on the amount of property you own, and your monthly household income. In Western North Carolina, the minimum monthly payout to unsecured creditors is 10% of the principal balance over the life of the Chapter 13 repayment plan. A significant advantage in Chapter 13 is that you are allowed to “catch up” on secured debt payments if you are not current on your mortgage or car loans. Chapter 13 works well for people who make solid income but are still falling behind on their mortgage, car, or credit card payments.
Many times, during initial consultations, I spend the majority of time speaking with clients about their options outside of bankruptcy. These conversations also help folks achieve solutions to their financial stress. If you are tired of wondering what your best strategy is, I’d be pleased to speak with you during a free, initial bankruptcy consultation.
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