Many people are unaware of the different chapters of bankruptcy or may have trouble distinguishing between a Chapter 7 and Chapter 13 bankruptcy. Here are some very basic things you should know about the differences between a Chapter 7 and Chapter 13 bankruptcy
Chapter 7
- Your unsecured debts (credit cards, medical bills, judgments, etc) are liquidated
- You must qualify based on your monthly income
- Your assets may be liquidated to pay your creditors unless they are protected by state law exemptions
- Majority of Chapter 7 bankruptcies are "no assets" bankruptcies where no assets are liquidated
- You can only file for Chapter 7 bankruptcy every 8 years
- Can only temporarily delay a foreclosure sale
- Reorganizes your debts and provides a repayment plan for your debts
- Repayment plans last for 3-5 years during which the bankruptcy trustee has control of your finances
- Repayment plan must be approved by a judge who needs to believe that you have the ability to repay your debts
- Allows you to keep your assets
- Can stop a foreclosure sale and allow you to keep your house if you can maintain your mortgage payment and pay past arrearages
- Your bankruptcy petition must be truthful and accurate
- Require completion of credit counseling and personal financial management classes
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