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Chapter 7: Liquidation of
Debts
Chapter 7 is designed for debtors with
financial difficulties that do not have the
ability to pay their existing debts.
Under chapter 7, depending on the size of your
estate, you are entitled to exempt a certain
amount of your property. In fact, many debtors
are able to keep everything that they own. However,
when there is a large estate, a trustee will
take possession of your property.
Still, you will be able to use your exemptions
in order to have items you need for a fresh
start. The trustee then liquidates the remainder
of the property and uses the proceeds to pay
your creditors according to the priorities of
the Bankruptcy Code.
The purpose of filing a chapter 7 case is to
obtain a discharge of your existing debts. If,
however, your are found to have committed certain
kinds of improper conduct described in the Bankruptcy
Code, your discharge may be denied by the court,
and the purpose for which you filed the bankruptcy
petition will be defeated.
Even if you receive a discharge, some debts
are not discharged under the Law. Therefore,
you may still be responsible for such debts
such as certain taxes, student loans, alimony
and support payments, criminal restitution,
and debts for death or personal injury caused
by driving while intoxicated from alcohol or
drugs.
Under certain circumstances, you may keep property
that you have purchased subject to valid security
interests. Your attorney can explain the options
that are available to you.
For more information, see our detailed
questions & answers regarding Chapter 7.
Chapter 13: Full or Partial Repayment of Debts
Chapter 13 is designed for individuals
with regular income who are temporarily unable
to pay their debts but would like to pay them
in installments over a period of time.
You are only eligible for chapter 13 if your
debts do not exceed certain dollar amounts set
forth in the Bankruptcy Code.
Under chapter 13 you must file a plan with
the court to repay your creditors all or part
of the money that you owe them, using your future
earnings.
Usually, the period allowed by the court to
repay your debts is three years, but no more
than five years. Your plan must be approved
by the court before it can take effect.
Under chapter 13, unlike chapter 7, you may
keep all your property, both exempt and nonexempt,
as long as you continue to make payments under
the plan.
After completion of payments under your plan,
all of your debts are discharged except for
alimony and support payments, student loans,
certain debts including criminal fines and restitution
and debts for death or personal injury caused
by driving while intoxicated from alcohol or
drugs, and long term secured obligations.
For more information, see our
detailed questions & answers regarding Chapter
13.
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