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.