Chapter 7 & 13 Bankruptcy

Chapter 7 & 13 Bankruptcy

CHAPTER 7 BANKRUPTCY

Also referred to as a “Straight Bankruptcy or Complete Discharge of Debts, Chapter 7 bankruptcy is the most common form of personal bankruptcy, allowing for a complete and immediate debt discharge through the liquidation of your assets. While some debts are not dischargeable in any form of bankruptcy-for example taxes, student loans, alimony and child support- Chapter 7 bankruptcy can relieve you of creditor harassment and the pressures of overwhelming debt.

The filing of a Chapter 7 case automatically stays (or stops) virtually all collection and other legal proceedings pending against the debtor. A few days after a Chapter 7 case is filed, the court mails a notice to all creditors ordering them to refrain from any further action against the debtor. Any creditor who intentionally violates the automatic stay may be held in contempt of court and may be liable to the debtor in damages. Criminal proceedings and actions to collect alimony, maintenance, or support from exempt property or property acquired by the debtor after the Chapter 7 case was filed are not affected by the automatic stay.

The principal advantage of Chapter 7 bankruptcy over Chapter 13 Bankruptcy is that you will be permanently released from all your dischargeable debts and gain a fresh financial start within months. Typically in Chapter 7 bankruptcy, the greatest portion of debt is unsecured debt, such as medical bills, credit card debts, and loans that are not backed by any tangible assets or property. These unsecured debts will be discharged, and secured debts (such as those backed by a house or car) will be subject to creditors’ claims and can be recaptured in satisfaction of amounts still due for that property.

Not all your tangible property will be subject to liquidation through Chapter 7 bankruptcy. Our bankruptcy attorneys can help you determine what property is exempt, if you will be able to prevent foreclosure on your home or repossession on your car, what you will be required to liquidate, and what the long-term consequences will be for you.

2005 Changes in Bankruptcy Law
In 2005 the United States Bankruptcy Code was changed requiring that individuals qualify to file for Chapter 7 bankruptcy. There has been much gloom written about the new bankruptcy laws and how much more difficult it is going to be to file. It is true that there are additional requirements under the new bankruptcy laws, which might require some people to file under Chapter 13 Bankruptcy instead of Chapter 7 Bankruptcy. However, for the vast majority of filers, Chapter 7 is still available.

In order to determine whether or not you qualify to file for a Chapter 7 bankruptcy, you should first take the Means Test. If the Means Test shows that you qualify to file for a Chapter 7 Bankruptcy then it is important to know that there are other requirements. All individuals filing for Chapter 7 Bankruptcy must attend a debt counseling course within six months of filing for Chapter 7 Bankruptcy protection. In addition, you will also be required to complete a financial education course prior to discharge of your debts.

CHAPTER 13 BANKRUPTCY

Generally, Chapter 13 Bankruptcy is the preferred options for those who have valuable assets, such as a home that is not completely covered by the bankruptcy exemptions they wish to keep. In Chapter 13 Bankruptcy, your bankruptcy attorney develops a debt repayment plan proposing to repay a portion of their debt to creditors over three to five year period, during which the debtor makes up payments that are overdue and pays into the Chapter 13 plan the equivalent value of any assets not covered by the state or federal exemptions. The Chapter 13 plan is presented to the Arizona Chapter 13 trustee for approval and confirmation by the Arizona Bankruptcy Court at a confirmation hearing to ensure that the plan meets the Bankruptcy Code requirements for confirmation. Chapter 13 Bankruptcy is usually appropriate only where an individual debtor has a regular source of income. The Chapter 13 plan developed by your bankruptcy attorney will require regular monthly or biweekly payments to the Chapter 13 trustee.

Chapter 7 Bankruptcy compared with Chapter 13 Bankruptcy
Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are very different. The main difference is that the Chapter 13 debtor remains in possession of the property of the estate and makes payments to creditors, through the Chapter 13 trustee based on the debtor anticipated income over the life of the plan. Additionally, in Chapter 13 Bankruptcy, there is no immediate discharge of debts. The Chapter 13 debtor must complete the payments required by the plan before a bankruptcy discharge is received. In both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy, the debtor is protected from lawsuits, garnishments, and other creditor actions. In Chapter 7 Bankruptcy, the debtor is protected from the bankruptcy filing under the 362 stay and after discharge by the discharge stay. The Chapter 13 Bankruptcy debtor is protected from the filing and during the time that the plan is in effect and after.

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