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What is the difference between Chapter 7 and Chapter 13 bankruptcy?

On Behalf of | Mar 31, 2022 | Bankruptcy |

It is common for people in Indianapolis to have credit cards, car loans, personal loans, mortgages and other types of debt. Utilizing various loans and credit can be very helpful when people want to or have to make major purchases. It can also be helpful when people find themselves in a tight financial situation and need to pay different bills. However, sometimes the debt can add up quickly and no longer be manageable for people.

This could be because of a sudden change in their circumstances such as a losing a job or suffering a medical injury or illness which requires significant medical treatment. Medical bills can add up very quickly and people may not be able to keep up with all of their obligations. The debt could become overwhelming and completely bury people financially.

It may not seem like people will be able to rid themselves of the debt, but they do have options, one of which could be bankruptcy. There are two main kinds of bankruptcy that individuals use and those are Chapter 7 and Chapter 13 bankruptcy. There are differences between the two and it is important to know which one is best for people’s situation.

Liquidation and repayment

Chapter 7 bankruptcy liquidates people’s non-exempt property and the cash from the liquidation is given to a trustee to pay as many creditors as possible. At the end of the process the remaining debt owed after the liquidation payments will be discharged.

Chapter 13 bankruptcy is more of a debt consolidation plan and allows people to keep many of their possessions as long as they continue to make their payments according to the plan. Any debt that is remaining after people complete the bankruptcy plan can be discharged as well.

People in Indiana who find themselves with overwhelming debt can be put in a very stressful situation where they may feel hopeless. However, people may be able to rid themselves of their debt through bankruptcy and achieve a fresh start. Experienced attorneys understand which bankruptcy may be best and help people through the process.