Chapter 7 Vs. Chapter 13
Deciding whether to file Chapter 7 or Chapter 13 is a decision not to be made lightly. It can mean the difference between keeping your property or having it seized and sold by a bankruptcy trustee. This is why you need a bankruptcy lawyer in Los Angeles like Michael Chekian, who is experienced in both Chapter 7 and Chapter 13.
Here at Chekian Law Office, most of the consumer bankruptcy cases we file are with a Chapter 7 bankruptcy lawyer in Los Angeles. This is because it is generally less expensive (both attorney fees and trustee fees), takes less time (4 months in Chapter 7 vs. 3 to 5 years in Chapter 13), and generally wipes out more debt than Chapter 13.
The danger of Chapter 7 vs. Chapter 13 (and where most people get into trouble), is that the Chapter 7 trustee controls all assets of the bankruptcy estate while a person or entity is in Chapter 7. This means if an asset is not properly protected or exempted, that the trustee can sell it for the benefit of the debtor’s creditors, and use the proceeds to pay creditors, the trustee, his attorneys and other professionals. Also, transfers of the debtor prior to the bankruptcy can be attacked by the debtor. The unwary or ill-advised debtor is exposed to having transfers to insiders like family, friends and businesses be unwound resulting in these 3rd parties having to return funds and property back to the Trustee. Property of the estate includes community property as well, so for instance, a non filing spouse can have her Mercedes sold by her spouse’s bankruptcy trustee. For all of these reasons, it pays to consult with an experienced Chapter 7 bankruptcy lawyer in Orange County like Michael Chekian to help you select which chapter to file.
The main concept to remember is in a Chapter 7, the trustee can control and sell any of your assets with court approval. Conversely, in Chapter 13, the debtor is in control (with court approval) of how assets are disposed of and how income is used. The tradeoff is that in a Chapter 13, payments must be made on some or all of the debtor’s debt, you have to pay as least as much as would be paid in a hypothetical Chapter 7, and property of the bankruptcy estate includes money earned by the debtor after the bankruptcy is filed. With Chapter 13, a stop foreclosure attorney in Los Angeles can prevent the sales of your possessions.
Some advantages of Chapter 13 over Chapter 7 include an enhanced ability to object to claims and to strip off liens. A Chapter 13 debtor can strip off a wholly unsecured junior mortgage, and on non-principal residence real estate, mortgages that are only partially secured by equity can be stripped down so that only the fully secured portion of the debt remains. Claim objections in Chapter 13 cases are an effective way to resolve ordinarily expensive tax disputes with the I.R.S. and the California Franchise Tax Board.
Chapter 13 debtors hold another advantage over Chapter 7 debtors because, unlike a Chapter 7, the trustee cannot involuntarily sell or seize property. However, if a Chapter 13 debtor owns or has an interest in property that is not fully exempt, in most cases the debtor must pay the dollar equivalent of that amount to creditors through the Chapter 13 plan.
Yet another advantage of Chapter 13 is that in addition to stopping property foreclosures and repossessions, it provides a way to pay back the arrears on the secured debt, so that in a successful plan, the debtor can emerge from Chapter 13 current again on the mortgage or vehicle loan, and thus free from the threat of foreclosure or repossession. Contact your debt settlement lawyer in Los Angeles at Chekian Law Office, email@example.com or 877 243 5529.
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