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What is Bankruptcy?
What is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy is governed by Chapter 7 of the Bankruptcy Code. Chapter 7 Bankruptcy is also known as a liquidation bankruptcy because debtors must liquidate non-exempt assets. This means the non-exempt assets are sold by the Chapter 7 Trustee for the benefit of creditors.
Fortunately, most consumer debtors' assets are fully exempt under state or federal law and no assets are sold. When there are no assets to sell, the chapter 7 case is usually short and lasts approximately 3 months.
After filing a Chapter 7, Debtors will attend a meeting of creditors with their attorney. This meeting will occur 30 to 45 days after filing. Although the meeting with the Chapter 7 Trustee is called a "Meeting of Creditors," creditors are unlikely to attend. However, creditors and other parties have 60 days following the conclusion of the meeting to object to a debtor's discharge. If no objection is made, the Court can enter an order of discharge.
What is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is also known as a "wage earners" or "reorganization" bankruptcy. This is because Chapter 13 clients will pay back some or all of their debts and will only liquidate if contemplated by the plan and allowed by the Court.
st of our clients choose chapter 13 when they have fallen behind on a mortgage; but chapter 13 is also extremely useful for clients who have fallen behind on other secured debts, such as car payments, and priority debts, such as child support and taxes.
In the case of a mortgage, a chapter 13 client will pay mortgage arrears over a 3 to 5 year term while maintaining ongoing mortgage payments. If a client has owned his car for 910 days or more, he or she may be able to pay the value of the vehicle through the chapter 13 plan rather than the note value. Priority debts, such as child support and taxes, are paid through the chapter 13 plan as well.
Unsecured debts, such as credit cards, medical bills, pay day loans and collection debts, will be reorganized according to the client's budget and assets, and may be paid nothing at all. As long as the client follows the bankruptcy rules and completes the case, the dischargeable unsecured debts are discharged. This means the creditors are barred from collection efforts by Court Order. Certain debts, such as student loans, taxes and child support, are not dischargeable.
How Can Bankruptcy Help Me?
If you qualify, bankruptcy may be able to stop a foreclosure, repossession, garnishment and creditor harassment. Bankruptcy can help you whether your goal is to keep and maintain your property or start fresh. For instance, a client whose home is facing foreclosure may choose to file a Chapter 13 Bankruptcy if the client wants to keep the home and has the means to maintain payments. On the other hand, qualifying clients may choose Chapter 7 Bankruptcy if they are facing mainly unsecured debts and simply need a fresh start. See our other eBooks for more information.
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