How does a Chapter 7 Bankruptcy differ from a Chapter 13 Bankruptcy?
A Chapter 7 Bankruptcy is often referred to as a Fresh Start bankruptcy. It is the Chapter under which the innocent but unfortunate debtor whose income is below or at least close to the median income for their household size is able to discharge certain unsecured debts. Upon filing, a trustee is assigned to your case. This trustee’s purpose is to liquidate any assets that are not exempt to pay creditors. Oklahoma law exempts most property that a normal household owns. The trustee will sell non-exempt assets (boats, motor homes, ATVs, and real property that does not make up the debtor’s primary residence) and distribute the money received amongst the creditors based on priority established under the Bankruptcy Code. Child support, alimony, certain taxes, and employment benefits are considered debts of higher priority over other debts. Approximately, 2-6 months after filing the Petition the debtor will receive a discharge.
A Chapter 13 Bankruptcy works differently in that, if the debtor has a stable household income that exceeds the median for their household size, it is presumed that they can pay back their debts to a certain extent. A Chapter 13 Bankruptcy allows a debtor to keep certain non-exempt assets but must formulate a plan to pay their creditors back over a 3-5 year (depending on their income) period. This is paid in monthly installments based upon the Means test calculations and is generally wage-deducted by the employer once confirmed by the court. After all payments have been made under these circumstances, the debtor will receive a discharge.
There are many factors to consider when deciding which Chapter to file and we can help.
Credit Counseling Sites:
– Online Pre-Filing Bankruptcy Counseling
– Online Debtor Education Course
Free Credit Report Sites:
– Annual Credit Report