Most people want to know whether they should file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. I can give you a pretty quick and easy answer to that. It’s a simplification of the process but it’ll at least get you started on the road to a full and complete understanding. The real difference between the two is that in Chapter 7 there is no repayment plan for creditors. So zero cents on the dollar, debts are discharged without paying the creditors, without paying the courts and without paying the trustee anything. It becomes a no asset case meaning that no assets are taken from you, the debtor or are collected by the trustee and administered or paid out or liquidated and paid out to creditors. In Chapter 7, there is no repayment plan. It’s not a plan to pay back creditors.
Alternatively, Chapter 13 is a repayment plan for creditors. It’s where you repay debts over 5 years. So the debtor, you, the consumer or the person filing bankruptcy, you’ll propose a Chapter 13 plan which will include an amount that you are able to pay to creditors over 5 years or over 60 months and the court will either approve that amount or tell you to go back and try to find more money, a creditor may object but for whatever reason, once you are in a Chapter 13, you are making a payment every month in order to pay back a portion of debt over the period of time that you are in the case which in most cases is 60 months unless you get all the debt paid back faster than that.
To summarize, in a Chapter 7 there is no repayment plan at all, zero cents on the dollar, everything goes away quick and easy. In a Chapter 13 it’s a 60 month 5 year repayment plan for creditors. In my personal opinion, if it’s possible to do a Chapter 7, my opinion is Chapter 7 is better. It’s quick, it’s easy, it’s cheaper, there is no repayment plan and frankly the legal fees are usually less. I’m in favor of a Chapter 7 if you can qualify.
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