The most common bankruptcy filed is a chapter 7. The protection of the bankruptcy process allows for the elimination of most if not all debts, and will stop foreclosure processes, allow a debtor to negotiate with secured lenders, allow payment of past support payments throughout a three or five year span of time, force the state to reinstate a drivers license for failure to pay civil penalties, etc. Most individuals who file a bankruptcy are permitted to retain all of their assets while at the same time discharging all their debts. A bankruptcy is not always the best option and one of our attorneys will explain alternatives to the filing of bankruptcy during the initial consultation.
A chapter 7 bankruptcy case does not involve a plan of repayment as opposed to a chapter 13 case. Instead, the bankruptcy trustee has the option/right to gather and sell the debtor’s nonexempt assets to pay back holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property; but a trustee may liquidate the debtor’s remaining assets. Potential debtors should be aware that filing of a petition under chapter 7 may result in the loss of property.
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Chapter 11 usually involves a corporation, partnership or an individual who does not qualify for either a Chapter 7 or Chapter 13 bankruptcy. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11. Generally, individuals who do not qualify for a Chapter 7 or Chapter 13 bankruptcy, due to constraints, will be forced to file a Chapter 11 bankruptcy.
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Chapter 13 offers individuals a number of advantages versus Chapter 7. Most significantly, Chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may compensate for delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that are due during the Chapter 13 plan in a timely manner. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the term of the Chapter 13 plan; doing this may lower the payments.
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