The most common types of personal bankruptcy are Chapter 7 and Chapter 13. In general, people who have no disposable income and cannot afford to pay back any of their creditors may file Chapter 7 bankruptcy. On a basic level, Chapter 13 bankruptcy is used by people who have disposable income and can afford to pay back some of their debt. Corporations and other business forms file under Chapters 7 or 11. Family farmers file under Chapter 12 and municipalities file under Chapter 9.
In Chapter 7 bankruptcy, a debtor receives a discharge of all but a few debts (such as taxes, domestic support obligations, student loans). If a debtor’s property is too valuable to protect, a Chapter 7 bankruptcy trustee will sell the property to raise money to pay the creditors. California has one of the most generous set of protections for debtor’s property (these protections are known as exemptions). Most of our clients are able to protect all of their property.
In Chapter 13 bankruptcy, the debtor retains ownership and possession of all assets, but must devote some portion of his or her future income to repaying creditors, generally over a period of three to five years. The amount of payment and the period of the repayment plan depend upon a variety of factors, including the value of the debtor’s property and the amount of a debtor’s income and expenses. Secured creditors usually have to be paid in full or at the full contract rate, whereas unsecured creditors sometimes receive very little or nothing.
Contact Seth today by filling out our free consult form in the right column or call us at (916) 780-7005 to find out whether Chapter 13 bankruptcy is the right option for your situation.