Bankruptcy cases have really increased in the last decade and more people continue to file for financial distress every year.
In the past, people with these problems were allowed to choose which chapter they found favorable for them.
Most chose chapter 7, the liquidation chapter.
However, this privilege has been ripped off by the court, indicating that they have to make the choice on behalf of the debtor.
To determine the suitable chapter for the individual, a means test is carried out.
In this case if the income of this individual is above the median expected in their local area, then they can file under chapter 13, which is basically the repayment plan.
Today most people choose to file under chapter 13, which allows them to continue paying their debts.
However it will only apply if the debtor has passed the means test.
In cases where they do not pass this test, the court allows the trustee to sell the assets and pay off the debts.
This chapter also has an advantage in that it allows the consumer time to avoid foreclosure.
Chapter 7 or the liquidation chapter has its lawyers charging high fees for anyone who chooses to go through this way.
In this case many people will often opt to pay less to lawyers who handle their bankruptcy cases under chapter 13.
It is important for people facing bankruptcy to carefully choose what is best for them.
Will they have their property recouped and sold or will they opt to pay their debts and keep their property? It is also wise and advisable to seek other solutions such as a repayment plan before committing to this.