Chapter 7 is a liquidation fresh start type of bankruptcy whereby a person who has very little in the way of assets and a lot of unsecured debt can file a Chapter 7 and get a fresh start. Under Chapter 7, debtors typically keep all of their properties such as houses, cars, personal belongings provided they continue to make monthly payments on those secured items. Chapter 7 is the most common for someone who is not making a lot of money or doesn’t have the ability to repay their debt and has not received a Chapter 7 bankruptcy discharge within the last eight years. Chapter 7’s make up 75% of all bankruptcy cases that are filed throughout the country whereby Chapter 13 represents 25%.
Chapter 13 is a common case to save a home that’s in foreclosure. Chapter 13 will allow you to make your regular mortgage payment on time once again and put a monthly payment plan together that will pay off your arrearage, the part you fall behind over the next 3 to 5 years. Chapter 13 is ideal for someone who has available money per month above and beyond their income to pay something back towards their creditors. Chapter 13 can provide for as little as a 10% payment plan or a 100% payment plan, depending upon the type of debt, the debtor’s assets, liabilities, income and expenses.
Either form of bankruptcy, whether it’s Chapter 7 or Chapter 13, provides a level of protection from creditor harassment. Under either chapter, lawsuits must stop, creditor collection efforts must stop including wage garnishments, big citations and any kind of telephone harassment. The chapter that you should file is dependent upon your income, your expenses, your assets and your liabilities. Your attorney will be able to advise you on the different types of chapters and which chapter is best for your particular situation.