Knowing the Distinctions Between Chapters 7 and 13: Insolvency

Financially, individuals and corporations can start over by having their obligations adjusted or discharged through the legal process of bankruptcy. traffic lawyer petersburg va  . There are two main chapters in the U.S. Bankruptcy Code: Chapter 7 and Chapter 13. Each has unique characteristics and goals of its own.

Chapter 7 bankruptcy, sometimes referred to as "liquidation" or "straight bankruptcy," aims to use the debtor's non-exempt assets to satisfy creditors. Most unsecured debts, such as credit card debt and medical expenses, can be discharged more quickly for eligible parties. Certain obligations, such as outstanding school loans and current taxes, cannot be discharged, and certain assets would have to be sold off to settle bills with creditors.

However, Chapter 13, also known as the "wage earner's plan," focuses only on debt restructuring for those with steady revenue streams. dui lawyer near me va  The debtor proposes a three- to five-year repayment schedule in lieu of asset sales. This approach combines debts, and the debtor makes payments to a trustee, who distributes funds to creditors in affordable monthly installments. Chapter 13 is typically chosen by those who want to keep their houses and other valuable assets while making up for missed mortgage or auto payments.

There are variations in the length of time the debtor's credit report is affected, and the bankrupty attorney  near me  Chapter 7 frequently remains on the credit record for ten years, although Chapter 13 could only be shown for seven. In addition, because of the length of the repayment plan, Chapter 13 cases take several years to finish, while Chapter 7 cases typically end in a few months.

In conclusion, the debtor's goals and unique financial circumstances determine whether to file for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 provides a quicker resolution through asset liquidation, whereas Chapter 13 provides a structured repayment schedule for people who want to keep valuable assets. You should see a bankruptcy professional in order to fully comprehend each chapter and make decisions that are appropriate for your particular financial situation.

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