Chapter 7 Chapter 13 Bankruptcy

* PLEASE NOTE THAT INFORMATION ON THIS PAGE MAY NOT FULLY EXPLAIN THE BANKRUPTCY LAWS UNDER THE NEW BANKRUPTCY REFORM ACT OF 2005 S.356. GENERAL EXPLAINATIONS SHOULD STILL APPLY, HOWEVER YOU WILL NEED TO SPEAK TO AN ATTORNEY FOR A DEEPER UNDERSTANDING UNDER THE NEW LAW.

There are two types of bankruptcy cases that most individuals or small businesses consider:

Chapter 7 Straight Bankruptcy

Chapter 13 Reorganization, Wage Earner (Individual Debt Consolidation)

CHAPTER 7

Straight Bankruptcy, or Liquidation Bankruptcy

When you can't pay bills like credit cards, medical bills, or loans, Chapter 7 is the bankruptcy type which might allow you to be discharged of your legal obligation to pay many of your debts and let you get a fresh start. Chapter 7 is often appropriate when debts for houses and cars are current, and there is no money left from your monthly paycheck to pay your bills like credit cards and signature loans. It allows you an opportunity to get your family back on a budget covered by your earnings.

You are allowed to keep a certain amount of property, which for many people is everything they own. You give up property if it exceeds the amount protected by law (protected property is called "exempt" property). Nonprotected property is sold, or liquidated, by the court representative (called the bankruptcy "Trustee"). Whether your property is protected or not will be explained to you during your consultation so that you can make a decision on whether this is the type of bankruptcy that will best suit your family's needs.

CHAPTER 13

Infividual Consumer Reorganization Bankruptcy, or the Repayment Plan

If you can pay a portion of your debts but not all of them, or you can't pay in the manner that your creditors want or as fast as they want, then Chapter 13 is a plan of repayment whichy is customized for you by your attorney using the protection of the bankruptcy laws.

Chapter 13 helps you by stopping foreclosures and repossessions, as well as student loan or tax garnishments. Your plan payments are calculated to pay for missed house payments, pay off your car, and/or pay the I.R.S., among other things.

It may reduce the payments made to some of your creditors. If your property exceeds the amount protected from your creditors in Chapter 7, then you might still be allowed to keep your property while making payments to your creditors through the court. If you can make payments, Chapter 13 will help you pay what you can afford and protect as much property as possible.

Note: there are three other types of reorganizations that do not apply to most individuals.

Chapter 9 (Municipality/Cities)

Chapter 11 (Corporate Reorganization, or for those individuals whose debts exceed Chapter 13 limits)

Chapter 12 (Farm Reorganization)