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Bankruptcy Law

Chapter 7 Bankruptcy

Chapter 7 is part of the Bankruptcy Code. In this form of Bankruptcy, the consumer asks the court to “discharge” certain unsecured debts. That means from the moment of the court order of discharge you are no longer legally responsible to repay those discharged debts. The creditor cannot attempt to collect the debt again.

As you might imagine there are certain restrictions to this process. Under Bankruptcy law, debts are either unsecured or secured. Examples of unsecured debt would be credit card debts and medical bills. Examples of secured debts would be home loans and car loans.

In Chapter 7 Bankruptcy your unsecured debts are the ones that are discharged. There are certain types of debts that are not generally dischargeable including:

  1. Money owed for child support, court ordered fines, and taxes
  2. Debts not listed in the Bankruptcy Petition
  3. Loans obtained by providing false information to the lender
  4. Debts resulting for the willful and malicious harm
  5. Student Loans
  6. Mortgages and other liens not paid in the bankruptcy case
  7. Personal Injury debts
  8. Debt incurred after you file bankruptcy

The Bankruptcy Court requires the consumer to provide a detailed list of all assets. Those assets that are not “exempt”, must be turned over to the court to pay the secured debts.

Chapter 13 Bankruptcy

Chapter 13 Bankruptcy relief allows a debtor the opportunity to pay off debts through a payment plan over a period of three to five years. The main benefits of the Chapter 13 Bankruptcy are that interest and late fees do not accrue while the debtor continues to make payments through the agreed-upon plan. Often a debtor will utilize the Chapter 13 option when he or she is behind on mortgage payments.

Chapter 13 Bankruptcy can also stop foreclosure proceedings and give the debtor the right to pay back the past due payments over a period of 36 to 60 months. Under the court-approved payment plan, a debtor will pay back a percentage, or all, of the unsecured debt. Once the plan is completed, the debtor will receive a discharge of the debts and will be able to keep his or her property.

The Chapter 13 Bankruptcy is designed for people who have a continual income, equity in their home, have previously filed for Chapter 7 Bankruptcy within the past eight years, or are not eligible to file for Chapter 7 Bankruptcy.