What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

 Posted on December 00,0000 in Bankruptcy

There are many ways a person can build up debt that he is unable to repay. An individual may accumulate multiple high-balance debts, such as a mortgage, auto loans, medical bills, or credit cards. Whether it is due to poor luck or decisions that did not work out as planned, when a person gets in over his head, he has the option to file for bankruptcy.

Bankruptcy allows a person to have a second chance if he no longer has the resources to repay his debts. While there are benefits to bankruptcy, such as the forgiveness of some debts, it will negatively affect a person’s credit score and his ability to borrow money in the future.

There are two common types of bankruptcy available to individuals, and each one has different requirements and regulations:

• Chapter 7 Bankruptcy: This method of bankruptcy will discharge most outstanding debts. Some debts, such as student loans or obligations to pay child support or spousal maintenance, cannot be discharged. When filing for Chapter 7, a person’s non-exempt assets will be liquidated by the bankruptcy trustee to pay off some of his debts. Some examples of assets which are exempt are tax-exempt retirement accounts, necessary clothing, educational texts, and prescribed health aids. In some cases, a filer may be able to maintain ownership of a home and/or a car that is below a certain value. This method provides a clean slate and fresh start by eliminating most debts.

• Chapter 13 Bankruptcy: With this option, a payment plan will be set up in which the filer will pay off some of the debts over a period of time. This can be a good option a person who does not qualify for Chapter 7 bankruptcy or who wants to avoid losing her home or other assets. A payment plan will follow either a three-year or five-year schedule, and once this plan is completed, most remaining debt will be discharged. If a person cannot finish the payment plan, she may still be able to file for bankruptcy under Chapter 7.

Contact an Illinois Bankruptcy Attorney

When filing for Chapter 7 or Chapter 13 bankruptcy, it is essential to work with a skilled attorney. Our experienced McHenry County bankruptcy lawyer will answer your questions, help you understand your options, and work with you to complete the bankruptcy process successfully.  Moreover, she will give you individual attention on each step of your case to make sure that your interests are adequately represented. Call our office at 847-426-7990 today to learn how Colleen Thomas can help you address your debts and begin that fresh start you so desperately need.

Source:

http://www.illinoisattorneygeneral.gov/consumers/bankruptcy.html