A chapter 7 bankruptcy is a liquidation bankruptcy, consequently non-exempt assets in a chapter 7 bankruptcy are liquidate or debtor may be able to purchase their non-exempt assets back from the bankruptcy estate. In a chapter 7 bankruptcy, the debtor has a limited amount of time to purchase back their non-exempt assets or relinquish the assets to the bankruptcy estate. If a debtor is unable to purchase back their assets from the estate or is unwilling to give up their non-exempts the debtor may consider filing a chapter 13. (Your attorney will let you know which assets in your case are non-exempt).
In a chapter 13 bankruptcy, the debtor keeps all their non-exempts-there is no liquidation-but the debtor will have to pay into the bankruptcy estate the same value they would have had to pay in the chapter 7. So what is the real benefit to filing the chapter 13, and the answer is: time. The chapter 13 bankruptcy allows the debtor to pay in a payment plan for the non-exempt assets for up to five years.
For example if a debtor has $4,000 worth of non-exempt assets and files a chapter 7 bankruptcy the trustee will want the $4,000 likely within the next 6 months. If this was a payment plan for the chapter 7 bankruptcy, the payment would be over $600 per month. In the same scenario for a chapter 13 bankruptcy, the debtor would still owe the estate $4,000, but they could choose to pay that off the non-exempt assets over the next three years or $111 per month. Chapter 13 bankruptcies can benefit individuals that have non-exempt assets that they would like to keep but do not have the funds available to purchase back those assets from the bankruptcy estate.
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Chapter 13 bankruptcies are a commitment and do require the repayment of non-exempt assets, but the chapter 13 also allows you time to pay for the non-exempts, shields you from your creditors and ultimately discharges the remaining unsecured debt. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back.
