Bankruptcy under Chapter 7 and Chapter 13
As defined by the dictionary, one is considered bankrupt if one has acquired debts, has been called upon by his or her creditors and is proclaimed by the court as financially ruined. The assets and properties of the debtor are then distributed to the creditors to pay for the outstanding debts.
In the US courts, the definition and parameters of bankruptcy
are defined and differentiated in two chapters: Chapter 7
and Chapter 13. Here are a few differences between the two:
Chapter 7 occurs when a person does not have a steady cash
flow to pay off debts in the future. In this certain assets
can be liquidated to settle with creditors and the remaining debt would
be discharged.
The debtor does not have to sell the assets himself. Instead, a bankruptcy trustee or a representative of the US court does this and the proceeds from the sale are distributed to the creditors as settlement.
The downside of filing for bankruptcy under Chapter 7 is it’s very aggressive and can reflect more negatively on you than a Chapter 13 bankruptcy.
A Chapter 13 bankruptcy, which is sometimes called an Individual Debt Adjustment, is used to set terms of repayment with creditors based on your income and ability to repay. In this case, debt isn’t discharged, it’s just renegotiated for repayment usually within a 3 to 5 year period. Chapter 13 is best suited for individuals who have a steady income and can benefit from reduced payments.
It’s important to be well-educated when it comes to bankruptcy. The best way to do that is to speak with an experienced law firm like ours. We offer free consultations at all of our 8 Chicagoland locations. Night and weekend appointments are available. Simply call 1-800-BANKRUPT today to schedule your free consultation.
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