San Bernardino County
Los Angeles County
What is the difference between a Chapter 7 and Chapter 13 bankruptcy?
A chapter 7 bankruptcy is your typical “liquidation” bankruptcy. Your non-exempt assets are sold and used to pay your creditors. You get to keep your qualifying exempt assets. Once your discharge is complete, your eligible debt is gone.
A chapter 13 bankruptcy is a “reorganization plan”. This means that you will work with a “Bankruptcy Trustee” to confirm a repayment plan to the creditors. This repayment plan restructures your payments to creditors in affordable monthly payments and allows you to pay your debt back over the length of your plan, typically 3-5 years. This type of bankruptcy allows a debtor to catch up on missed mortgage payments “arrears” and pay them through the plan.
How do I know which Chapter to file for bankruptcy?
Most debtors are eligible to file a Chapter 13 bankruptcy. Debtors must qualify through the “means test” to be eligible to file a Chapter 7 bankruptcy. The means test weighs among other factors your income against your state’s median family income, your type of debt, and your amount of debt. Call us today to discuss which option is right for you.
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