Which is Best for Me Chapter 7 or 13?
What is Chapter 7 ?
A Chapter 7 bankruptcy is a straight bankruptcy or a liquidation bankruptcy. Most people who file Chapter7 bankruptcy do not have the financial ability to repay existing obligations. In a Chapter 7 bankruptcy the trustee gathers the debtor’s assets which are not exempt under either the Federal Bankruptcy Code or under applicable state law, and liquidate the non-exempt assets. Any proceeds from sale of non-exempt assets are used by the trustee to pay creditor claims.
What is Chapter 13 ?
A Chapter 13 bankruptcy is a repayment or reorganization bankruptcy. In a Chapter 13 bankruptcy the debtor has a steady stream of income, wants to retain certain assets and has the ability to re-pay all or part of the debt overtime. The debtor and Counsel determine a repayment plan which is proposed to the Chapter 14 trustee. A Chapter 13 bankruptcy sets up repayment over a period of 3-5 years. The length of the repayment plan is fact specific and should be discussed with an attorney. In most Chapter 13 bankruptcy actions the debtor pays the trustee their disposable income and the trustee distributes payments to creditors.