What is the Difference between a Chapter 7 and a Chapter 13 Bankruptcy?
Millions of consumers every year benefit from consumer bankruptcy. Among the most commonly filed forms of bankruptcy are Chapter 7 and Chapter 13, both can only be filed by natural persons, not by corporations. A husband and wife can file jointly in the same case or file separately.
While both Chapter 7 and chapter 13 provide consumers relief under the United States bankruptcy code, there are significant differences between the two. As a result, the type of bankruptcy appropriate for your situation will depend on your specific circumstances. An experienced Phoenix bankruptcy attorney will be able to review your finances and then advise you as to what type of bankruptcy, if any, could benefit you.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common type of bankruptcy filed in the United States. Also known as a “liquidation bankruptcy,” Chapter 7 bankruptcy involves liquidating a debtors non-exempt assets and using the proceeds to pay off outstanding debts. Most debts that are not satisfied are discharged, meaning that they are completely wiped out. Importantly, there are certain debts that are nondischargable in most circumstances, including student loans and any unpaid child support payments. Among the types of debts that are generally dischargeable include:
- Credit card debt
- Personal loans
- Civil judgments
- Business loans
- Payday loans
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Chapter 13 Bankruptcy
Chapter 13 bankruptcy differs significantly from Chapter 7 bankruptcy. In a Chapter 13, a debtor is able to keep most of his or her property, while restructuring debts and making payments of a court approved payment plan. In many chapter 13 cases only a very small fraction of unsecured dect is repaid- most of it is discharged upon completion of the case. In a Chapter 13 bankruptcy a consumer makes payment to a trustee who distributes funds to creditors. Generally, Chapter 13 bankruptcy is beneficial for people who have steady income who are having difficulty keeping up with their monthly payments. Chapter 13 can also be effectively used to avoid foreclosure in many cases as well.
Contact a Phoenix bankruptcy lawyer today to schedule a free consultation
If you are experiencing financial difficulty, bankruptcy may be an option you may want to consider. Bankruptcy is not right for everyone, and an experienced Phoenix bankruptcy lawyer will be able to go your situation and advise you if he or she believes that bankruptcy could benefit you. Attorney Ronald J. Ellett has over 20 years of experience helping Phoenix consumers obtain a fresh start through bankruptcy. To schedule a free consultation, call Ellett Law Offices today at (602) 235-9510.