Chapter 7 Bankruptcy
Chapter 7 Bankruptcy may eliminate most kinds of unsecured debt. Some examples of unsecured debts are credit cards; medical bills; most personal loans; judgments resulting from car accidents; and deficiencies on repossessed vehicles. In addition to getting rid of your debt, you typically can keep all of your property. As long as your car and mortgage payments are current, and there is no significant equity in your property, we should have no problem making arrangements for you to keep your home, keep your car and keep your personal belongings. In addition to eliminating most kinds of unsecured debt, Chapter 7 bankruptcy stops creditor harassment, eliminates repossession debts, stops garnishment, ends lawsuits, and most importantly helps you rebuild your credit.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy, also called a wage earner's plan, enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. During this time the law forbids creditors from starting or continuing collection efforts.
Advantages of Chapter 13 over Chapter 7
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors.
