By: Grech Legal  09/20/2014
Keywords: Bankruptcy, Bankruptcy Attorney, Bankruptcy Lawyer

Chapter 7 bankruptcy is often called “liquidation” bankruptcy because you wipe out all (or most) of your debts and in return the bankruptcy Trustee liquidates your property to pay your creditors. However, because the trustee cannot take exempt property (property that state or federal bankruptcy law decrees as protected), most Chapter 7 bankruptcy filers keep all or most of their property. Most people file for Chapter 7 bankruptcy in order to wipe out their debts. While many debtors will be able to disharge most or all of their debt, it is important to understand that some debts may not be erased in bankruptcy. Additionally, if one or more of your debts is secured by property (such as a home or vehicle), you may be able to get the debt wiped out, but the underlying lien will remain, which means if you stop paying your mortgage or car note after the bankruptcy, the lender can repossess the property in question. In Chapter 13 bankruptcy, which is often called “reorganization” bankruptcy, you pay off your debts through a repayment plan administered by the bankruptcy Trustee. During the plan period, which is three or five years, you also get the protection of the bankruptcy court, which means a creditor cannot foreclose on your house or repossess your vehicle without first obtaining court permission. Please keep in mind that this is a long-term commitment and requires that the debtor stick to a strict budget. For some high earners that do not qualify for Chapter 7 relief, Chapter 13 bankruptcy is the only option. Further, Chapter 13 is often the best bankruptcy option for those people who are behind in their mortgage payments or car note and want to keep their home or vehicle. Also, in a Chapter 13 bankruptcy some of your debts must be paid in full, while others you may pay at a discount (sometimes pennies on the dollar). Because the debtor receives the protection of the bankruptcy court during the repayment period, the plan can alleviate the stress and burden of overwhelming debt and monthly obligations. If you successfully complete your plan, any remaining balance on most of your unsecured debts will be wiped out.

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