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Chapter 7

Chapter 7 bankruptcy is sometimes called liquidation bankruptcy or fresh start bankruptcy. Unsecured debts such as credit cards, medical bills, payday loans, repo deficiencies, apartment deficiencies, and personal loans are typical debts that can be discharged by filing a Chapter 7 bankruptcy. 

Some debtors choose to surrender secured debts and extinguish their personal liability on those underlying liens. For instance, if the debtor chooses to surrender their car in the Chapter 7, the personal liability on the auto loan will be discharged and the creditor will take back the collateral. The benefit in surrendering the car in the Chapter 7 is that the debtor will be able to get out of a car loan that may have a high interest rate or high payment. Once the debt is discharged, the car creditor cannot sue or collect on the debt. 

The debtor will list all of their personal property on their Chapter 7 schedules and use the proper exemptions to protect the property from being liquidated. Any property not covered by an exemption could be liquidated by the Chapter 7 trustee to repay some or all of the creditors in the case. If the debtor is a business, no exemptions can be claimed. 

The Chapter 7 filing protects the debtor from all creditor's collection activities including stopping evictions, stopping lawsuits, and stopping all calls from bill collectors. From date of filing until the end of the bankruptcy, the total time that the debtor stays in the bankruptcy is typically 4 to 6 months. Once the case discharges, the debtor can begin the process of rebuilding their credit by paying their new debts on time or in full each month. One can only file one Chapter 7 every 8 years so one needs to be careful when taking out new debt after the Chapter 7. 

To see if you qualify for Chapter 7 bankruptcy contact a local bankruptcy lawyer for your free consultation. The attorney will discuss your options and determine if you will be able to pass the means test which is a primary determining factor in qualifying for the Chapter 7. 

Chapter 13

Chapter 13 bankruptcy is also called repayment bankruptcy. A Chapter 13 plan is prepared which tells the creditors how they will be paid. The repayment plan allows for the debtor to catch up their back mortgage payments when facing foreclosure, pay their car loan off at a lower interest rate and possibly lower total amount, pay off tax debt or back child support, and discharge their unsecured debt. 

Debtors may choose Chapter 13 bankruptcy to stop the foreclosure of their home. The Chapter 13 plan can fund the arrearage on the home and help the debtor keep their home. A debtor may choose to file a Chapter 13 to stop the repossession of their vehicle and allow them to pay off the car in the plan. The interest rate on the car loan can be crammed down to a lower rate and the car loan may be paid off at a lower total amount if the car was purchased more than 910 days prior to filing. 

Tax debts can pile up and feel like there is no way out. A Chapter 13 will allow the debtor to repay the priority portion of their tax debt and prevent tax levies and bank levies from the taxing authority. Getting behind on child support can also be corrected through the Chapter 13 plan with the arrearage being paid in the plan. 

Sometimes the filing of the Chapter 13 is not what the debtor initially wishes to do. If the debtor makes too much money to qualify for Chapter 7, a Chapter 13 may be their only bankruptcy option. The amount that the debtor must repay is based on a number of factors including the means test. Often, the debtor in a Chapter 13 will not have to repay the entirety of their debts. Whatever does not get paid will be discharged upon plan completion. Some debts may not be able to be discharged such as student loans and some tax debt. 

If you're facing a foreclosure and want to save your home, facing a repossession of your car, or tax levy, a Chapter 13 attorney will be able to help you through the process. The process is complicated but an experience bankruptcy attorney can guide you through the process.