Generally, the main difference for understanding Chapter 7 vs Chapter 13 bankruptcy is how debt will be handled. In brief, Chapter 7 bankruptcy wipes out debt, while Chapter 13 bankruptcy reorganizes debt.
The Chapter 7 process is very similar to that of a Chapter 13 bankruptcy. Initially, a bankruptcy petition is filed in the United States Bankruptcy Court. The Bankruptcy Laws in California are based on the United States Bankruptcy Code.
To begin with, a bankruptcy petition is filed in every type of bankruptcy case. Much of the required documentation is identical in any bankruptcy filing. Also a 341a meeting of creditors is required in each bankruptcy case.
Property is protected the same way, regardless of the type of bankruptcy. Indeed, statutory exemptions are applied to assets. In turn the assets are protected by the exemptions. Overall, people can protect their houses, cars, wages, bank accounts, retirement accounts, investments, websites, pets and other household items.
Likewise, both types of bankruptcy stop creditors. Meaning, as soon as a bankruptcy case is filed, creditors are prevented from harassing, collecting or enforcing judgments.
However, in a Chapter 7 bankruptcy you are no longer paying your creditors. Whereas the Chapter 13 plan requires payments to your creditors.
Try not to get overwhelmed with all of this information. Our dedicated and experienced San Diego Bankruptcy Attorneys offer a free consultation. We will walk you through Chapter 7 vs Chapter 13 Bankruptcy and the benefits and alternatives to each. Contact us now!
Chapter 7 Liquidation
Although referred to as a Chapter 7 Bankruptcy liquidation, the goal is simply to get rid of debt while retaining all assets. In fact, the majority of bankruptcy cases filed are no asset chapter 7 bankruptcy cases. To put it another way, the law affords most Chapter 7 bankruptcy filers to walk away from their debt without losing any property.
For the most part, Chapter 7 bankruptcy filings are the result of a life-changing event. For example, losing a job, unforeseen illness, or the death of a spouse which in turn makes it impossible to pay off or even pay these debts. With this in mind, Chapter 7 bankruptcy is a solution for those who need immediate relief from debt.
Examples of debt include credit card bills, medical bills, personal loans, auto repossession deficiencies, some back taxes and other unsecured debts.
In a Chapter 7 Bankruptcy, the filer is allowed to protect assets and other things owned. Importantly you can keep your house in chapter 7. To emphasize, using California exemptions, up to $600,000 of equity can be protected.
Chapter 13 Information
On the other hand, a Chapter 13 Bankruptcy case restructures debt. This type of bankruptcy is more suitable for those who are receiving monthly income. That is due to the requirement for a payment each month to a Chapter 13 Bankruptcy Trustee.
A plan of reorganization must be filed in every Chapter 13 Bankruptcy. Accordingly, the purpose of the plan is to propose a Chapter 13 bankruptcy payment. Among the details in the plan is who will be paid, how often and what amount. Which creditors will be paid and how much varies significantly depending on income, assets, past due mortgage and vehicle payments and more. A "once size fits all" Chapter 13 payment does not exist. This is because there are so many variables that make up a plan payment. For this reason it is extremely important to contact a San Diego Bankruptcy Attorney with experience handling Chapter 13 cases.
There are many benefits of Chapter 13 including keeping all property even if it exceeds exemption amounts. One of the biggest advantages is the ability to include missed payments on real property and vehicles. There is no provision to catch up on past due secured payments in a Chapter 7 case whereas Chapter 13 provides this type of debt restructuring. Generally the balance of these past due payments must be paid in full during the course of the Chapter 13 Plan. This is accomplished through fixed monthly payments.
Chapter 13 plan payments are paid over three or five years. For example, if you are above median income your payments will be made over five years whereas if you are below median income, your plan will be three years. A bankruptcy judge must sign off on a Chapter 13 plan before it is confirmed or finalized.
For more answers, contact the Bankruptcy Law Offices of Mark L. Miller to discuss your questions and best option for your financial situation.
