Chapter 7 vs 13 Bankruptcy
Understanding the Crucial Differences
People who plan to file for bankruptcy in Murrieta need to know that there are two types of consumer bankruptcy. The first is Chapter 7 bankruptcy, also known as "liquidation bankruptcy", which is usually ideal for people who have lower incomes. The second is Chapter 13 bankruptcy and is typically filed for by people who have enough income to repay the debt they owe to their creditors.
If you are thinking of filing for Chapter 7 or Chapter 13, understanding the differences will help you choose the right type of bankruptcy for your individual situation. Below, a Murrieta bankruptcy lawyer at Singleton Smith Law Offices explains several of the differences between these two types of consumer bankruptcy:
- Liquidation: when people file for Chapter 7, they must go through the process of liquidation. However, when they file for Chapter 13, they do not have to go through this process. During liquidation, people's assets, property and valuables are sold for a profit. The profit is then turned over to their creditors to repay the debt that they owe.
- Repayment of Debts: people who file for Chapter 13 will have to repay the debt that they owe to their creditors. They will be responsible for coming up with repayment plans and will need to make monthly payments toward their debt over the course of 3 - 5 years. People who file for Chapter 7 do not have to repay their creditors as their debt is discharged.
- Debt Discharge: anytime people file for Chapter 7, they usually do so to have their debts discharged. When people's debts have been discharged, they are officially eliminated and people are no longer responsible for repaying their creditors. If people file for Chapter 13, their debts are not discharged. Instead, the debts are repaid.
To learn more about the differences between Chapter 7 and Chapter 13, contact a Murrieta bankruptcy attorney from Singleton Smith Law Offices today!