Understanding the differences between chapter 7 and chapter 13 bankruptcy can make it easier for you to decide whether beginning a bankruptcy case is an option to re-establish your financial future. The bankruptcy code establishes several types of bankruptcy; Chapter 7 bankruptcy and chapter 13 are the two types generally filed by individuals.
How Assets Are Treated
Chapter 7 cases may be considered an asset or no-asset case. After allowing for the relevant federal and state exemptions, any additional belongings are liquidated to pay debts. When a chapter 7 bankruptcy is treated as an asset case, priority debts, such as child support arrearages, are paid. Then, secured debts and unsecured debts are paid. If the case is considered a no-asset case, the creditors receive nothing.
A chapter 13 bankruptcy is an asset case. However, the debtor is allowed to keep their belongings.
When you file for chapter 13, you are required to create a repayment plan.
You’ll learn more about the payment plan in the next section. One of the benefits of choosing chapter 13 is that you’re able to catch up on certain monthly payments and keep your possessions, such as your home.
One of the main factors when choosing between chapter 7 and chapter 13 is whether you have assets, such as a home in foreclosure. To learn more about how your assets may be treated in the different types of bankruptcy, what the filing fees are, and how to rebuild your credit report, schedule your free consultation with the Law Offices of B Sisson!
The Requirements of a Repayment Plan
In a chapter 7 bankruptcy case, there is no repayment plan. As previously mentioned, if the bankruptcy case is considered an asset case, the assets are liquidated, and the debts are specifically ordered. Unsecured debts are the last to potentially receive a payment. After you complete credit counseling, the 341 meeting takes place, and all of the other requirements are fulfilled, you receive your discharge.
When you file for chapter 13, you must propose a repayment plan. Your chapter 13 plan must be approved by the bankruptcy court. Once it is approved, both secured debts and unsecured debts receive a percentage of the monthly payments you make to the trustee. The monthly payments are determined based on your disposable income. You will make payments directly to the trustee for up to five years. After you complete your repayment plan, you receive your discharge.
It is important to consider that chapter 7 could be converted to chapter 13 and chapter 13 could be converted to chapter 7 under certain circumstances.
Schedule Your Free Bankruptcy Consultation
If you're ready to learn more about how the differences between chapter 7 and chapter 13 could affect you, schedule your free consultation with the Law Offices of B David Sisson. The bankruptcy code can help you get a clean start for your financial future. To learn more about filing for chapter 13 or chapter 7 bankruptcy in Oklahoma and whether it’s right for you, contact us today!