Types of consumer bankruptcy Manual del abogado

Consumers have two very different bankruptcy options:

• Capítulo 7
• Capítulo 13

Capítulo 7

This option liquidates non-exempt assets Anything a person owns that has financial value to pay debts and leaves the debtor A person who owes money to someone else with little to no further responsibility to repay. Exempt assets include items needed to work and live.

Chapter 7 is best for those who:

• Can exempt most of their assets;
• Have little to no non-dischargeable debts; (11 USC § 523); and
• Have limited excess funds in budget.

Advantages:

• An automatic stay stops further collection action, repossessions, and phone calls by creditors;
• Chapter 7 allows the debtor to protect certain exempt assets from liquidation, in accordance with Illinois state law (735 ILCS 5/12-901 and 5/12-1001); and
• Chapter 7 only takes 3-6 months from filing to relief from debt.

Disadvantages:

• The filing shows up on the consumer's credit report for 10 years, making it extremely difficult to obtain credit or a mortgage A loan given by a bank that is used to help someone buy a home in the future;
• Chapter 7 will discharge most but not all debts, such as tax liens, domestic support obligations, and student loans;
• The client may have to give up non-exempted property for sale by the trustee A person that has custody of or control over funds or items of another ;
• Chapter 7 is available only once every eight years as a remedy, and filing Chapter 7 prevents a debtor from receiving a discharge in a Chapter 13 case for four years. 11 U.S.C. § 727(a)(8) and 1328(f)(1)

Capítulo 13

This option enables the debtor to repay debts in whole or in part over a three to five year period.

Chapter 13 is best for those who:

• Do not qualify for Chapter 7;
• Have a stable and regular income;
• Are behind on debts but could pay them over time with more assistance;
• Have debts that are non-dischargeable under Chapter 7 but are dischargeable under Chapter 13;
• Have assets more than the statutory exemption levels;
• Want automatic stay to protect co-debtors while paying off joint debt; and/or
• Want to avoid moral stigma of "complete" bankruptcy.

Advantages

• Debtor retains control of assets during the pendency of the case; and
• Debtor can submit a plan for complete or partial repayment of debts.

Disadvantages

• The filing shows up on the consumer credit report for 7 years;
• In addition to repaying priority and secured debt in full, a debtor must still pay unsecured debt equal to the amount of their nonexempt assets that would have been liquidated under Chapter 7;
• If the repayment plan fails or the case is dismissed Cases dismissed with no further action anticipated. , then the debtor will be subject to creditor Someone who is owed money collection efforts again;
• Attorney fees may be high considering the attorney’s involvement throughout the repayment process;
• Chapter 13 is available only once every two years as a remedy; and
• The debtor must have sufficient income to sustain the repayment plan as ordered by the court.