CHAPTER 7 AND CHAPTER 13 BANKRUPTCY

Chapter 7, and Chapter 13 bankruptcy are the two most common types of bankruptcy available to individuals, and small businesses.  Often debtors (persons who file) under these chapters will be able to get rid of large portions, if not all, of their unsecured debt.

 

Chapter 7 Bankruptcy – Eliminate Unsecured Debt:  Chapter 7 bankruptcy is a good way to get rid of unsecured debts, which generally includes credit card debt, medical bills, payday loans, etc.  Chapter 7 is a shorter and more straightforward process, and typically results in a complete wipe out of one’s unsecured debt after a period of roughly four months.  Chapter 7, however, is not available to all debtors:  if you have too high of an income, or too many assets, then you will not qualify for Chapter 7 bankruptcy, and you would need to file for Chapter 13 bankruptcy instead.

 

Chapter 13 Bankruptcy – Save Your Home/Restructure Secured Debt:  A Chapter 13 often allows you to both get rid of unsecured debt and restructure secured debt (e.g. home loans or car loans).  In a Chapter 13, you set up a multi-year payment plan (most often 5 years), through which you can get caught up on secured debt arrears (late payments), and often get rid of a substantial portion of your unsecured debt (credit cards, payday loans, etc.)  Chapter 13 allows individuals with significant assets (e.g. a home or other real property) to file for bankruptcy, while keeping these assets, even if you are behind on your payments at the time of filing.  A common misconception regarding Chapter 13 bankruptcy is that you are required to pay back 100% of your unsecured debt.  Very often this is not the case – many Chapter 13 debtors receive a substantial discharge of their unsecured debt (not unlike a Chapter 7 case) while simultaneously keeping major assets like homes and cars.  A Chapter 13 case will require that the debtor have regular income, but this income can be supplemented with financial support from family or friends.  A chapter 13 can be very beneficial to struggling home owners or others who have significant assets or income, but need a little breathing room.

Call us to learn whether Chapter 7, or Chapter 13 is best for you:

(510) 868-1765 or (925) 818-2795

Typical Benefits of Chapter 7 Bankruptcy:

• Discharge/eliminate credit card debt, medical bills and other unsecured debt.

• Stop lawsuits and wage garnishments

• Discharge most income tax debts that are more than 3 years old

• Avoid “cancelled debt” taxes and deficiency judgment

Typical Benefits of Chapter 13 Bankruptcy:

• Most of the benefits of Chapter 7, plus…

• Save homes from foreclosure and catch up on mortgage arrears over time

• Discharge second, and third mortgages that are wholly unsecured

• Improve chances of getting a loan modification on your home loan

• Save car loans from repossession and catch up on late payments over time

• For certain car loans, “cram down” or reduce the balance owing on the loan to the car’s current market value

• Repay non-dischargeable income taxes without paying interest or late fees to the IRS or the California Franchise Tax Board

Debts Generally Not Dischargeable in Bankruptcy:

• Alimony and child support obligations

• Student loan debt

• Recent income tax debt

• Debts obtained by fraud/misrepresentation

• Criminal fines and restitution

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