Chapter 7 and Chapter 13 Bankruptcy are like different sides of a coin. They are as different as night and day. When most people think about bankruptcy they think about Chapter 7 Bankruptcy. And a lot of people are confused about what a Chapter 13 Bankruptcy is, and is not.
Chapter 7 Bankruptcy is focused on your assets and what is “exempt” (think protected and you don’t lose) or “non-exempt” (think not protected and you will lose to trustee to benefit your creditors). People who file Chapter 7 Bankruptcy cannot afford to make payments back to their creditors. In Chapter 7 Bankruptcy, you make no payments back to your creditors---at least in terms of a monthly payment plan. There could be non-exempt assets which are sold and the proceeds used to pay down your debt.
On the other hand, Chapter 13 Bankruptcy is a debt consolidation plan sponsored by the government where you do make payments back to your creditors. The plan length is typically 3-5 years in duration, and at the end of the plan, whatever debt remains unpaid, gets wiped out, tax free, forever. Some people mistakenly think that you pay all your creditors in full. In the vast majority of Chapter 13 cases this is not true. In fact, in the vast majority of Chapter 13 Bankruptcy cases, creditors get pennies on the dollar and the balance of the unpaid debt gets wiped out, tax free, forever.
The key with a Chapter 13 Bankruptcy is, while in the Chapter 13 Bankruptcy, a) creditors are barred from collecting from you and b) once the plan is confirmed, creditors are bound to the terms of the plan. The focus in a Chapter 13 Bankruptcy is not on assets but on your income.
Call now for a free strategy session from a MN Bankruptcy Lawyer from Kain & Scott
When the time is right, or when you are ready, reach out to Minnesota’s most kind and helpful bankruptcy law firm by going to www.kainscott.com. You will be so glad you did!
