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How Are Chapter 7 and 13 Bankruptcy Similar?

For both Chapter 7 and Chapter 13 bankruptcy, individuals have the opportunity to get their finances in order and improve their future financially. These processes are better suited to help individuals that may be in need of financial help. After the paperwork is filed for one of these bankruptcy processes, an automatic stay can go into effect and benefit the individual going through with this process. With this in effect, individuals do not have to face harassment from creditors any longer. The automatic stay bars creditors from contacting debtors in an attempt to collect compensation. This tool helps individuals focus on their financial planning and avoid the stress of creditors.

What’s Involved in Chapter 7 Bankruptcy?

Before filing for Chapter 7 bankruptcy, you must meet the eligibility requirements. To qualify for this bankruptcy process, individuals have to undergo credit counseling and attend a debtor education course to prepare. In addition, they must pass a means test, which compares their income to the median income in the United States. In order to be eligible to claim bankruptcy, their income has to be below the median income. However, there has been cases where they can be approved even if their income does not fulfill that standard. Once you have met the eligibility requirements, a petition for bankruptcy must be filled out. In this petition, you will have to claim a list of all your debts, an account of your income, monthly living expenses and a list of assets. When the paperwork is completed, the automatic stay goes into effect immediately.

How Does Chapter 13 Bankruptcy Proceed?

Filing for Chapter 13 bankruptcy is very similar to the process that individuals go through for Chapter 7 bankruptcy. Eligibility requirements need to be met first. These requirements include credit counseling 180 days before filing for bankruptcy. If you previously filed a petition that was dismissed within that 180 days, you cannot file again.

Once you file for bankruptcy, you should include documents that outline a list of liabilities, assets and property, a statement of financial affairs, a list of executory contracts and unexpired leases, proof of credit counseling and any plan developed to handle the matter, income payments within 60 days prior to filing, monthly net income and any indication in a rise of income or expenditures and interests the debtor has in state or federally-qualified education or tuition accounts. An automatic stay goes into effect for Chapter 13 bankruptcy as well. Once the paperwork is completed and filed, the automatic stay will go into effect immediately.

Juan C. Velasco, Esq. is a trusted attorney who concentrates on bankruptcy, family law, real estate, and estate matters who has been serving the New Jersey area for over 25 years. If you are in need of experienced legal counsel, please contact Velasco Law Office and we will be happy to assist you.