CHAPTER 7 vs. CHAPTER 13 BANKRUPTCY


15 May

During the midst of the coronavirus (COVID-19), millions of good workers have filed for unemployment.  The unemployment rules have been viewed more loosely during this catastrophic pandemic.  However, there will come a time when unemployment will not protect you.

Some people are  fortunate and will have their old jobs back at some point.  Others will not.  If you find yourself with bills piling up and nowhere to work, bankruptcy will protect you and may be your only alternative at this time.  

Depending upon your situation, there are different types of bankruptcy that you will want to choose from. . 

In a Chapter 7 bankruptcy, it is your intent to eliminate most or all of your debt. It’s a liquidation, so anyone filing bankruptcy under Chapter 7 risks losing non-exempt property to their unsecured creditors. On the flip side of the coin, a Chapter 13 bankruptcy will allow you to keep what you have.  The major difference is that in a Chapter 13 bankruptcy, you enter into a plan to repay your creditors for at least 3 years. In other words, you cannot achieve discharge until that time.  In a Chapter 7 bankruptcy, you can probably obtain a discharge in several months.

A consideration that most people will have to make is whether they want to keep their home and automobiles.  If you surrender them in a Chapter 7 bankruptcy, they are no longer yours.  You can choose to put them on the list in Chapter 7.  You will be released from the mortgage and auto payments; however, again, you will lose those assets.  A second option is to keep them off of your Chapter 7 filing.  While your other debts are forgiven, you will still have to keep up the mortgage payments on your home and your automobile payments.  You can also keep the auto and home by filing Chapter 13.  In that case you will be making payments on a plan.

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