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CHAPTERS 7 & 13

CHAPTER 7
A Chapter 7 bankruptcy is commonly known as a “fresh start bankruptcy,” a “straight bankruptcy,” or a “liquidation bankruptcy.”  Basically, in a Chapter 7 bankruptcy you keep all of the property you own up to a certain dollar amount and any property above that can be taken by a bankruptcy trustee and sold, with the money going to pay down your debt.  Any eligible remaining debt is discharged (i.e. “wiped out.”)  Eligible unsecured debts such as credit card debt, medical bills, payday loans, old utility bills, deficiencies on vehicle repossessions, unsecured lines of credit, and unsecured loans are discharged.  If you owe on a house, car or other secured property you must keep making the payments in order to keep the property.  If you would rather not make those payments, or you can no longer afford them, you can give the property back to the lender and the lender cannot “come after you” for the remaining balance or penalties.
 
CHAPTER 13

A Chapter 13 bankruptcy is commonly known as a “debt reorganization” bankruptcy.  In a Chapter 13 bankruptcy you make monthly payments over three or five years.  Your monthly payment may include your mortgage payment and arrears on your mortgage payment if you are behind, car payments, back taxes, child support, and spousal maintenance.  Depending an various factors it may or may not also include payment towards your unsecured debt.  At the end of your Chapter 13 bankruptcy any remaining eligible unsecured debt which has not been paid is discharged (i.e. “wiped out.”)

WHICH CHAPTER IS RIGHT FOR YOU?

First you must qualify for either a Chapter 7 and/or Chapter 13.  Once you are qualified you still might be able to elect one or the other.  Every person’s situation is different and there are many issues to consider when deciding upon a bankruptcy chapter.  Therefore the answer is not “one size fits all.”  Together we will review your financial situation and I will advise you regarding all of your bankruptcy options, including the pros and cons of each.

To read more about the bankruptcy process and the different bankruptcy chapters click here.