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  • Topic: Ch. 7 & Ch. 13 Bankruptcy

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    • September 6, 2012 12:23 PM PDT
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      Chapter 7 Bankruptcy


      In Chapter 7, the person/company is ordered to surrender his or her non-exempt property to a bankruptcy trustee who then sells the property and pays those collected funds to the creditors which are owed. For this, the person/company is entitled to a partial discharge of debt. Certain conditions can however prevent the person/company being resolved of this said debt such as concealing records relating to financial condition and debts arising from spousal, child support, student loans and taxes will not be discharged even though the person/company is resolved form other debts. It's common to see exempt only property in those with financial stress. These items can include things such as clothes owned, household goods or an inexpensive car and will not have to be surrendered under the terms of the Chapter 7 bankruptcy. State regulations determine the actual amount of exemptions allowed. Chapter 7 relief is available only once in any eight year period. If a person/company has collateral for which a loan was secured, the creditor still has the right to collect that collateral even though the debt could have been absolved. For example, if a person/company possesses a car and files for Chapter 7 bankruptcy, the creditor can repossess their car.

      The 2005 amendments to the Bankruptcy Code introduced the "means test" for eligibility for chapter 7. A person/company who fails the means test will have his or her Chapter 7 case dismissed or may have to convert his or her case to a case under Chapter 13.

      Generally, the trustee in charge of the said property will sell most of the debtor's assets to pay off creditors. Certain assets of the debtor are protected to some extent however. For example, Social Security payments, unemployment compensation, and limited values of equity in a home, car, or truck, household goods and appliances, trade tools, and books are protected. However, these exemptions are regulated by individual States.


      Chapter 13 Bankruptcy


      In Chapter 13 Bankruptcy, individuals can retain ownership and possession of their items and establish a repayment plan over a period of 3-5 years typically. The amount of payments and the periods are determined by factors such as income, expenses, assets worth and if the creditor is secured. Only people with a regular source of income can apply, and only those with debts that do not exceed prescribed limits will be allowed to use this Chapter 13 bankruptcy.

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