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The main differences between Chapter 13 and Chapter 7 bankruptcy

On Behalf of | Mar 15, 2024 | Firm News |

Indiana residents who are contemplating bankruptcy probably start with the same questions as anyone else with a legal issue: Where do I start? When it comes to bankruptcy for individuals and families, there are typically two options to understand: Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Bankruptcy differences

Of these two options, Chapter 7 bankruptcy is probably the one that most people think of when they think of filing for bankruptcy. This form of bankruptcy is typically referred to as liquidation bankruptcy and, true to that label, this is the route by which the filer’s non-exempt assets are sold off and the proceeds from the sales are applied toward debt obligations. Then, any remaining debt is, for the most part, discharged.

Chapter 13 bankruptcy has a bit more to it. Under this form of bankruptcy, the filer will repay debts under a structured plan that is based on their income earnings. So, as our readers can probably imagine, this is the form of bankruptcy that may be available for people who have a steady income to rely upon. Creditors may be more inclined to support this type of bankruptcy plan because, in theory, they will recover at least some repayment of the outstanding debts.

A potential filer’s income will be the key in determining which bankruptcy options are available. Any Indiana resident who is facing debt burdens may want to consider bankruptcy as an option to finally deal with their financial situation.