If you are considering bankruptcy in Muskogee, you probably already know that federal and state bankruptcy laws allow consumers (and businesses) to either eliminate or restructure their debt, while receiving protection from creditors.
Chapter 7 and Chapter 13 are the most common types of bankruptcies that apply to consumers. That being said, there are fundamental differences between the two that you will want to know about before deciding upon one or the other. The following will help you understand the key differences between Chapter 7 and Chapter 13 bankruptcy in Muskogee.
Kinds of Bankruptcy in Muskogee
There are generally two categories of bankruptcy proceedings:
1) Liquidation – under which you may receive a complete discharge of your unsecured debt.
2) Reorganization (debt restructuring) – under which you may restructure your debt to repay some creditors.
Each has its own set of rules, exemptions and criteria for eligibility that takes into account your income, your assets, how much debt you possess and of what type. The bankruptcy strategy you choose will largely depend on which of these two types of bankruptcies you qualify for.
Chapter 7 Bankruptcy in Muskogee
Chapter 7 bankruptcy, also referred to as “straight bankruptcy,” is the most common type of bankruptcy case. It is available to both individuals and businesses, and the process typically lasts from 3 to 6 months.
Chapter 7 bankruptcy belongs to the liquidation category of bankruptcy proceedings, as it requires debtors to liquidate “non-exempt” assets in order to payoff secured debts and to receive a complete elimination (discharge) of debts that are not secured by collateral.
Qualifying for Chapter 7 Bankruptcy
In order to be eligible for Chapter 7 in Muskogee, you must pass a court administered “means test” to insure that you do not have sufficient income to repay your debts. If your income is too high, you may still have the option to file Chapter 13 bankruptcy, provided that the amount of debt you owe is below certain federally prescribed limits.
Limits on Discharge Under Chapter 7 Bankruptcy
Normally, credit card debts and other unsecured consumer debts are dischargeable. However, some debts, such as child support, alimony, legal fines and most taxes, cannot be discharged through bankruptcy. Secured debts are also non-dischargeable and will typically be settled by the liquidation or repossession of the underlying assets.
Chapter 7 Bankruptcy Exemptions
Oklahoma law allows certain items, such as, clothing, furniture, cars, houses, and other personal belongings, to be exempt from liquidation, up to a certain dollar amount.
For secured debts, such as automobile and home loans, Oklahoma law gives you the option to keep the property by reaffirming the debt or to have it sold, repossessed or foreclosed to satisfy the debt.
So, while there is a risk of losing some assets to offset secured debt, most debtors who qualify for Chapter 7 bankruptcy lose very little and receive a complete discharge of their unsecured debt.
Chapter 13 Bankruptcy in Muskogee
Chapter 13 bankruptcy belongs to the category of bankruptcy proceedings referred to as reorganization (debt restructuring). It involves the reorganizing of an individual’s or business’ debt in order to pay off their creditors over a specified period of time.
Qualifying for Chapter 13 Bankruptcy
Individuals and businesses can qualify for Chapter 13 bankruptcy if the amount of debt they possess does not surpass certain federally prescribed limits and if they have sufficient income to repay this debt over time.
Restructuring Your Debt Under Chapter 13 Bankruptcy
Under Chapter 13 bankruptcy, you will be required to propose a plan to payoff your creditors over a 3 to 5-year period, at the end of which you will receive a complete discharge of any remaining unsecured debt.
The size of the installment payments you will make in the repayment plan will depend on a variety of factors, such as your income, the amount and type of debt you possess and how much unsecured debt would have been satisfied if your assets were liquidated under Chapter 7 bankruptcy.
For secured debts, you will be allowed to make arrangements with your creditors to make up missed payments by adding them to your proposed repayment plan, and in this way avoid repossession or foreclosure of the underlying assets.
So, Which One Is Right For You? Chapter 7 or Chapter 13 Bankruptcy?
If you possess a large amount of unsecured debts, no assets to be liquidated, insufficient income to repay your creditors and you can pass the means test, Chapter 7 bankruptcy may be best for you.
On the other hand, if you cannot qualify for Chapter 7 bankruptcy, possess a large amount of secured debt, significant amount of assets that you would like to keep and sufficient income to repay your debt over time, Chapter 13 bankruptcy may benefit you best by providing you with relief from creditors and collection proceedings while you reorganize your debt and get your financial affairs in order.
Low-cost Consultation: Muskogee Bankruptcy Attorney
The bankruptcy lawyers at The Wirth Law Office – Muskogee can help you examine all your alternatives, explore whether a Chapter 7 bankruptcy or a Chapter 13 bankruptcy can help you wipe out unmanageable debt, and get you well underway to a fresh start. They can also help you explore alternatives to bankruptcy — such as credit counseling, negotiating agreements with creditors, combating illegal debt collection practices, or restructuring your budget – and help you with other credit-related issues.
Call The Wirth Law Office – Muskogee at (918) 913-0725, or toll-free at 1-(888) 947-8452 (Wirth Law) for a initial strategy session with a skilled Muskogee bankruptcy attorney. If you prefer, you can use the box in the upper right corner to send us a short message.
