Marcus H. Herbert & Associates
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Determining which bankruptcy chapter suits a person's needs

For people in Kentucky who are experiencing financial problems that they do not believe they can escape, the stress can be overwhelming as they seek solutions and try to find a way to move forward. Bankruptcy is a legal strategy to overcome financial challenges and start again either with a clean slate (Chapter 7) or with a payment plan (Chapter 13). Mentioning these two basic options is important as many prospective filers are not aware of the difference and how the situation determines which is preferable.

Chapter 7 is a liquidation. People who do not have significant property and assets can get a clean slate by filing for Chapter 7. If there are assets that are of value, a trustee will take them, convert them to cash and distribute them to creditors to pay some of the debts. Since Chapter 7 generally does not have nonexempt property, it might not be wise for a person who owns a home or a car with value to file for it. After the case is completed, the debts are discharged and the person will no longer face the calls, letters and relentless debt collection attempts. It will drastically harm the person's credit, but most are willing to make that tradeoff and rebuild their credit as time passes.

Chapter 13 is for those who earn wages and can make a certain fixed payment every month. This is useful for individuals who own property they want to keep like a home or a motor vehicle. The trustee will receive a certain amount every month for three to five years and distribute the payments to creditors. This is a payment plan. The means test is critical for Chapter 13 and for Chapter 7 and it will be a key part of determining which chapter will be used.

With Chapter 13, the discharge will not be done until after the payment plan is completed. The debtor is required to make those payments on time and in full. While the plan is ongoing, lawsuits, wage garnishments and other strategies creditors and debt collectors use to get payment are not allowed.

Before filing for bankruptcy, it is wise to have a grasp of which chapter is suitable. Understanding the various aspects of the chapters can give a debtor a clearer picture of what can and cannot be accomplished through the process. Medical debt, credit card debt and other financial albatrosses can be settled by using bankruptcy. Calling a bankruptcy law firm that can help with a case from start to finish is imperative.

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Marcus H. Herbert & Associates
416 S 5th St
Paducah, KY 42003-1530

Toll Free: 866-702-8933
Phone: 270-908-0552
Fax: 270-443-6345
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