Chapter 7 Bankruptcy Vs Chapter 13 Bankruptcy
Chapter 7 Bankruptcy: Also known as liquidation (converting assets into money) or straight bankruptcy, this is the most common form of bankruptcy filing. This is one of the faster ways of starting afresh and more so if there are no objections from any of the parties involved. Ordinarily, most (if not all) debts would be discharged within months of the attorney filing a bankruptcy petition.
A trustee is appointed who collects all non-exempt property, sells the assets and dispenses proceeds from this sale to appropriate creditors. Chapter 7 is different from other bankruptcy filings because the debtor needs not make a payment to the trustee. Even though in some cases this would mean that you will lose all your assets, this need not always be the case. Under Chapter 7 Bankruptcy, the debtor receives a discharge on all dischargeable debts. There are 19 general classes of debt that are discharged under Chapter 7 Bankruptcy. An added advantage with Chapter 7 bankruptcy is that by signing a reaffirmation agreement a debtor can continue to pay for a car loan or a mortgage on their home. This agreement is in place because as per the US Government Bankruptcy Code a debtor could be allowed to keep some or all of his property.
Chapter 13 Bankruptcy: filing may be referred to as “debt reorganization.” For people perceptibly able to pay back some or most of their debts (by showing proof of income), this may be a better filing choice, and in particular, if you’re attempting to keep property, like homes or cars, this bankruptcy filing may help you do this better than Chapter 7 filings.
Both types of bankruptcy plans are limited to individuals, though in some cases, if you own a business, you may be required to pay back money to the business for which you have personal liability. Chapter 13 Bankruptcy, more like a payment plan, stays on your credit report for seven years. A Chapter 13 filing may be preferred over Chapter 7 for consumers with assets they don’t want to lose, and those willing to get rid off of their debts under a less-pressured structure. Some debt balances may be partially liquidated, and the filer agrees to a monthly payment to the trustee for the remaining creditors. Chapter 13 filings may not be as severe as Chapter 7 filings since you are showing an interest in paying off your debts.
Chapter 13 filing allows you, if you have a regular income and limited debt, to keep property, such as a mortgaged house or car that you might lose under Chapter 7. In Chapter 13, the court typically approves a repayment plan that allows you to pay off your debts during a period of three to five years.