Understanding the Differences Between Insolvency and Chapters 7 and 13
Through the legal process of bankruptcy, both people and organizations can have a fresh start in terms of their finances by having their obligations reduced or discharged. traffic lawyer petersburg va The U.S. Bankruptcy Code consists of two primary chapters: Chapter 7 and Chapter 13. Everybody has distinct qualities and objectives of their own.
The goal of Chapter 7 bankruptcy, sometimes known as “liquidation” or “straight bankruptcy,” is to pay off creditors with the debtor’s non-exempt assets. For qualified parties, the majority of unsecured debts, including credit card debt and medical bills, can be discharged more swiftly. Some debts, such as unpaid student loans and current taxes, cannot be forgiven, and some assets would need to be liquidated to pay off creditors.
But Chapter 13, sometimes referred to as the “wage earner’s plan,” is limited to debt restructuring for people who have reliable sources of income. dui lawyer near me va Instead of selling assets, the debtor suggests a three- to five-year payback plan. With this method, debts are combined and payments are made to a trustee, who then disburses money to creditors in manageable monthly installments. People who wish to make up for missing mortgages or auto payments while keeping their homes and other valued assets usually opt for Chapter 13.
The duration of the impact on the debtor’s credit report varies, and the bankrupty attorney near me While Chapter 13 may only be shown for seven years, Chapter 7 often stays on the credit report for ten. Furthermore, whereas Chapter 7 cases usually conclude in a few months, Chapter 13 cases take several years to complete due to the length of the repayment plan.
In summary, the decision to apply for Chapter 7 or Chapter 13 bankruptcy depends on the debtor’s objectives and particular financial situation. Chapter 13 offers a planned repayment schedule for those who wish to retain valued assets, while Chapter 7 offers a speedier resolution through asset liquidation. To fully understand each chapter and make decisions that are appropriate for your unique financial circumstances, you should consult with a bankruptcy professional.
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