Chapter 7 and 13

Chapter 7
Chapter 7 Bankruptcy is liquidation. A Chapter 7 debtor is an individual whose expenses exceed its income. This could be caused due to illness, economic hardship, unemployment, unexpected lawsuits, tax debts, or any other circumstances that renders them insolvent. The individual is unable at this point to repay back its debts. Filing for relief under Chapter 7 of the United States Bankruptcy Code can afford the individual the ability to discharge or eliminate their dischargeable unsecured debts while maintaining a certain protection over some of their assets. Each state law grants the individual the privilege of protecting certain amount of equity in some of their assets. These are referred to as State Law Exemptions. The Federal government has its own exemptions similar to that of State Laws.

Chapter 13
Chapter 13 bankruptcy is commonly known as individual debt adjustment or repayment plan. A Chapter 13 bankruptcy can be filed only by individuals. A typical case generally involves people who have fallen behind in their mortgage payments, delinquent with their priority taxes, or have debts that are generally non-dischargeable in a Chapter 7 (student loans, child support arrears, and others). Filing a Chapter 13 plan of reorganization takes into assumption that the individual has a source of income. Such income exceeds the individual's household expenses. In essence, the individual has disposable income to be able to fund the plan of reorganization. With this extra income, the individual will be able to pay back their creditors over a 36 to 60 month plan. The advantage is that the individual will be able to force creditors, in a successful plan, to accept his/her terms. These terms afford the individuals relief from losing their home, risking an IRS or State taxing agency levy, wage garnishments, liens and other methods utilized by creditors to collect on their debts.

Remember, preserve your finances. Avoid bankruptcy. Settle or negotiate bad debts. Click here to fill out your information and continue to get a Free Savings Estimate from our Debt Negotiation - Debt Consolidation partner.