Comparing chapter 7 and chapter 13 bankruptcy

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Bankruptcy laws offer a fresh start to people who are overwhelmed with debt. Cases of personal bankruptcy are filed under the U.S. Bankruptcy Code as either Chapter 7 or Chapter 13 Bankruptcy.

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Comparing chapter 7 and chapter 13 bankruptcy

  1. 1. Comparing Chapter 7 andChapter 13 BankruptcyE. Michael Vereen III
  2. 2. About Personal BankruptcyBankruptcy laws offer a fresh start to people who areoverwhelmed with debt. Cases of personal bankruptcy are filedunder the U.S. Bankruptcy Code as either Chapter 7 orChapter 13 Bankruptcy.
  3. 3. Chapter 7 BankruptcyChapter 7 bankruptcy entails a liquidation of the debtor’s assets.This means that the debtor’s nonexempt property would be soldwith the proceeds going to the creditors. Chapter 7 wouldcommonly be used if you possess little property besides thebasics of clothing and furniture. Oftentimes, the debtors areunable to meet monthly expenses or have very little money leftafter paying them. Filing Chapter 7 bankruptcy does provideadvantages to debtors. The majority of unsecured debts will becompletely eliminated. Also, the debtor can receive theirdischarge in as little as a few months so it is a quick process. Inorder to file for Chapter 7 bankruptcy, the debtor must qualifyunder the “means test” and receive credit counseling from anapproved agency.
  4. 4. Chapter 13 BankruptcyChapter 13 bankruptcy adjusts the debts of the individual andallows them to maintain possession of their property while theypay back their debts. This repayment period is usually over thecourse of three to five years. Chapter 13 bankruptcy is used whenthe debtor has a regular income and can maintain their monthlyliving expenses but cannot sustain regular payments of their debt.The debtor may have significant equity that they wish to keep andthis type of bankruptcy allows that. Another advantage is thatthere is no contact with creditors throughout the three- to five-yearrepayment period. Rather, the debtor is responsible for making asingle payment to the bankruptcy trustee each month. To qualifyfor Chapter 13 bankruptcy, the debtor’s unsecured debts musttotal below $360,475 and their secured debts must not exceed$1,081,400.
  5. 5. About the Author E. Michael Vereen is an accomplished attorney with over 20 years of experience. He specializes in criminal, DUI, and bankruptcy law.E. Michael Vereen III • Attorney at Law • (770)345-9449 • vereenlaw.com

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