There are two types of bankruptcy for individuals. Chapter 7, or straight bankruptcy, involves the liquidation of all non-exempt assets, which are sold to pay some of the creditors. Chapter 7 remains on a person’s credit report for ten years. With a Chapter 13 bankruptcy, instead of giving up assets, an individual submits a plan to the court that explains how he or she intends to pay off debts in the next three to five years. If the plan is approved, the bankruptcy trustee is paid a set amount each month, which is distributed to the person’s creditors. A Chapter 13 filing may be the preferred method for people who have assets that they do not want to lose, tax liabilities or if their homes value is less than what is owed on their first mortgage and need to eliminate a second or third mortgage.
If you have any questions about today’s column, or about any aspect of the bankruptcy system, please call our office today. Our attorney provides a balanced range of legal services combined with a singular commitment to our clients. We are positive and energetic, responding to our clients’ needs with clarity, diligence, and integrity.
HINT: A Chapter 13 bankruptcy also remains on a credit report for ten years after filing.
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