Bankruptcy book and Judge Gavel — Practice Bankruptcies in Youngstown, OH
Chapter 7 bankruptcy offers the debtor a clean slate and is sometimes called liquidation bankruptcy or straight bankruptcy. The term “liquidation,” in reference to Chapter 7 bankruptcy, denotes the fact that the trustee in the bankruptcy proceeding is free to liquidate unprotected or non-exempt assets in order to repay creditors. Chapter 7 bankruptcy allows most debts to be wiped out with the individual retaining most of their possessions except for those that are non-exempt. Although Chapter 7 bankruptcy can be referred to as “liquidation bankruptcy,” this is actually a rare occurrence. The majority of the property is protected under state law by the exemption. When it is protected, a creditor is not at liberty to seize the property and the debtor retains all rights of ownership. The main goal of filing Chapter 7 is to eradicate debtor obligations and discharge existing debt. One of the benefits inherent in this type of bankruptcy is that the debtor does not need to make payments to the creditors from future income. Some debts are not eligible for discharge in a bankruptcy proceeding; however, in exchange for giving up some of your property, there are debts that can be erased permanently.
Chapter 13 bankruptcy is a consolidation of debts into one repayment plan and allows an individual to reorganize debts and to pay the unsecured debt without any further interest accumulating. It also protects the debtor from creditors while the debt is being paid off. Unlike Chapter 7, a Chapter 13 petition does not ask for an immediate discharge of debts. Instead, he or she offers a plan to repay at least part of those debts over a period of time, usually three to five years, depending on the debtor's disposable income. While a Chapter 13 plan is in place, the debtor is protected from lawsuits, garnishments, and other creditor action. The Chapter 13 debtor's plan must be approved by the bankruptcy court. A person who files Chapter 13 bankruptcy remains in bankruptcy until all of the payments in the plan have been made, and the judge issues a discharge of the debts.