Chapter 7 Vs Chapter 13 Bankruptcy: Learn The Difference

The difference between filing Chapter 7 Vs Chapter 13 bankruptcy is that with Chapter 7, the debtor agrees to liquidate assets to pay off debts, and with Chapter 13, the debtor negotiates the actual amount of debts for reasonable payments which they can make to their creditors.

Chapter 7 bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. A trustee takes possession of all your property and assets but you may claim certain property or assets as exempt from seizure under governing law. Chapter 7 bankruptcy is used to eliminate, or discharge, primarily unsecured debts such as credit cards or medical bills. Chapter 7 does not eliminate secured debts, such as mortgage and automobile loans (unless the secured item is surrendered).

Chapter 13 bankruptcy is dedicated to providing you with protection from actions by creditors; such as home foreclosure, property repossession, and wage garnishment. When a bankruptcy case is filed, an "automatic stay" is issued by the Court, preventing action against you by creditors. Chapter 13 Bankruptcy is also known as a reorganization bankruptcy and is usually filed by individuals who want to pay off their debts over a period of three to five years. Chapter 13 is designed for an individual debtor who has a regular source of income who does own a great deal of property or assets, but find that their income cannot cover the exorbitant payments on debts owed. In this form, the debt is restructured, and in some cases reduced so that individual debtor can retain their assets but have reasonable payments which they can afford.

Related Videos: 

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Bankruptcy Information: An Overview When Filing For Bankruptcy

Buying A Car During Bankruptcy: Learn The Procedures

Chapter 7 Bankruptcy: Find Out The Pros And Cons

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