What is the difference between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy?

In this video we will find out about what is Chapter 7 Bankruptcy, what is Chapter 13 Bankruptcy, and how does Chapter 7 Bankruptcy and Chapter 13 Bankruptcy different.  Chapter 7 Bankruptcy, is the most common form of Bankruptcy and sometimes called liquidation Bankruptcy. The reason it’s called liquidation Bankruptcy is that the Bankruptcy trustee is able to donate or sell the debtors nonexempt assets. These liquidated assets are used to pay off part or all of your debt. In a Chapter 7 Bankruptcy your Bankruptcy attorney will evaluate your financial situation by examining your monthly expenses, your secured debts and your unsecured debts. Then your Bankruptcy attorney must evaluate your assets and determine which could be exempted from Bankruptcy under either state Bankruptcy exemptions or federal Bankruptcy exemptions, and to determine if at all, any assets cannot be exempted from Bankruptcy. Chapter 7 Bankruptcy usually last between 4 to 5 months for the normal debtor and once the Bankruptcy is closed the debtors that will be discharged. Chapter 13 Bankruptcy or otherwise known as repayment Bankruptcy, the debtor is given a chance for repaying his secured debt and part of his unsecured debt over a 3 to 5 year repayment.. During this time the debtor will be making their normal monthly payments to their secured debts such as mortgages and car loans and making a monthly repayment fee to the Bankruptcy trustee, who in turn will turn this money over to your secured creditors and unsecured creditors, after taking their 15% fee. The main differences between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are who can file each and why would you file one over the other. Chapter 7 Bankruptcy does not allow people who make over the median family income for the state they reside in and their household size. Chapter 7 Bankruptcy does not allow you to save secured property which is in arrears of payment, basically if your mortgage is past due and you file Chapter 7 Bankruptcy you will lose your home or if your car loan is past due and you file Chapter 7 Bankruptcy you will lose your house. This is the main reason for filing Chapter 13, is when you have secured debt that is in arrears but you still want to keep the property. Chapter 13 Bankruptcy will allow you to save property if you can financially manage to make the repayment plan over the next 3 to 5 years and pay your normal monthly payment. Chapter 13 Bankruptcy is also for people who make too much money to file Chapter 7 Bankruptcy or people who have large assets which they wish are not to be liquidated with a Chapter 13 Bankruptcy proceeding.

Joseph F. Botelho, Esq.

BOTELHO LAW GROUP
Attorneys At Law

901 Eastern Ave. 
Unit 2
Fall River, MA 02723 

Office:  888-269-0688