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Consumer Bankruptcy-
Chapter 7 and Chapter 13
If an individual finds himself in debt, and no matter what he tries, cannot gain control of the problem, the only solution may be to file for bankruptcy relief. For an individual, this types of bankruptcy is referred to as Consumer Bankruptcy. There are two principal Consumer Bankruptcy options, either Chapter 7 Bankruptcy (known as a Liquidation Bankruptcy) or Chapter 13 Bankruptcy (know as a Wage Earner Bankruptcy).
Chapter 7 Bankruptcy provides for the cancellation on request of many kinds of debts for people who cannot meet their financial obligations. Under Chapter 7 Bankruptcy, a petition to the federal court immediately suspends lawsuits, wage garnishments, and other debt collection, even before a judge rules on the petition.
At the end of the Chapter 7 Bankruptcy process, the debtor will receive a “discharge” of many of his unsecured debts. Some taxes may be discharges, but some may not be. Some of the debtors property may be retained, such as property exempt from the claims of creditors under state or federal law. Property subject to liens is not taken in the bankruptcy proceeding. But some property will be lost to pay his debts. The debtor’s future income will not be used to repay his debts. At the end of the process, the debtor has a “fresh start” at a new financial life.
The other main type of Consumer Bankruptcy is Chapter 13 Bankruptcy. Under a Wage Earner Bankruptcy, much more of the debtor’s property can be retained. A plan for the payment of the accumulated debt is proposed to the court and the creditors. In general, the plan provides for the payment of the debts over a three to five-year period out of the debtor’s future income. The plan covers both secured debt, such as a mortgage, and unsecured debt, such as credit card debt. At the end of the plan, the balance of debt is discharged.
Chapter 13 Bankruptcy is particularly helpful in certain situations. If you have a home with equity, but you are behind in your mortgage payments, a Chapter 13 Bankruptcy might be the strategy to pursue to save your home. If you owe a debt and have a co-signer on the obligation, Chapter 13 Bankruptcy will protect the co-signer and allow you time to pay off the debt.
Index of Consumer Bankruptcy Practice
| Chapter 7 Bankruptcy | | Chapter 13 Bankruptcy |
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Copyright © 2007 STEPHEN C. SILVERBERG, PLLC All rights reserved.
Last modified: December 26, 2007
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