Should I File for Chapter 7 or Chapter 13 Bankruptcy in Nevada?
If you are among the many Las Vegas residents struggling to keep up with your mounting debts, you may have thought about filing for bankruptcy. But where do you begin? Maybe you asked AI questions and are vaguely familiar with terms like “Chapter 7” or “Chapter 13,” but don’t truly understand what they mean. In this article, we provide a brief overview of these two specific types of bankruptcy so you can get a better idea of which may be more applicable to your situation.
Chapter 7: When You Need to Start Over
The Bankruptcy Code is divided into different chapters, several of which govern specific types of bankruptcy proceedings. Chapter 7 covers what are called “liquidation” bankruptcies. For individual debtors, Chapter 7 is appropriate when they are simply unable to repay their creditors and effectively need to start over fresh, free of existing debts.
In a Chapter 7 case, a court-appointed trustee takes possession of property owned by the debtor that is not “exempt” or protected, and liquidates it to repay creditors. Any remaining unpaid debt is “discharged” by the court, meaning except for certain categories of nondischargeable debt, the debtor is no longer legally obligated to pay the discharged debts. In reality, most Chapter 7 bankruptcies do not result in the debtor losing any of their property. These are “no-asset” Chapter 7 cases, and occur when debtors lack significant amounts of property, or when everything they own is fully protected by applicable exemptions statutes.
For example, Nevada allows a person to exempt up to $605,000 of equity in their home. In general, if the value of your home after subtracting the amount of your mortgage is less than the applicable exemption, your home cannot be touched in a Chapter 7 bankruptcy. Chapter 7 does not, however, eliminate a secured creditor’s rights in the property itself. So, if you are behind on your mortgage payments and file for Chapter 7, your mortgage lender could still foreclose on your home even if you receive a Chapter 7 discharge. In these situations, Chapter 13 may be the better option.
Chapter 13: When You Need to Reorganize and Repay Over Time
Unlike a Chapter 7 liquidation, Chapter 13 bankruptcy involves “reorganization” and repayment over time. Chapter 13 is appropriate for individuals with regular monthly income who need time to catch up or “cure” things like past-due mortgage or vehicle payments, or to pay recent tax liabilities. This involves filing a plan of reorganization with the court and making monthly payments to repay certain debts over a period of 3 to 5 years. For some people, Chapter 13 may be the only bankruptcy option available if they earn too much to qualify for Chapter 7 and are required to repay a portion of their debts before receiving a discharge.
One key advantage of Chapter 13 is that all debts are addressed by one plan of reorganization. Rather than continuing to deal with each creditor individually, a debtor can simply make a single monthly payment to the court-appointed Chapter 13 trustee, and the trustee disburses payments to creditors according to the plan. Once the repayment plan is complete, the debtor receives a discharge from the court, just like in a Chapter 7 case.
Contact a Bankruptcy Attorney at Larson & Zirzow Today
Filing for Chapter 7 or Chapter 13 bankruptcy is a significant life decision that can impact your family and finances for many years, which is why it is crucial to speak with an experienced Las Vegas bankruptcy lawyer who can answer your questions. At Larson & Zirzow, our attorneys work with you to explore available options and help you decide what’s best based on your circumstances. Call Larson & Zirzow today at 702-382-1170 to schedule a complimentary consultation.