Though regular readers of our Louisville Bankruptcy Law Blog have certainly heard of Chapter 7 and Chapter 13 bankruptcies, not everyone is sure of differences between the two.
Let’s take a quick look at some of the main distinctions between these two common ways to help people reduce or eliminate serious debt.
Chapter 7 is known as a liquidation bankruptcy because most of your property is sold, and then the proceeds are used to pay off debts. It is typically for people with limited incomes and they simply do not have the resources to pay back all or a portion of their debt. Chapter 7 offers the most complete relief from debt, offering people a chance to get out from under unsecured debt, typically within a few months.
Fortunately, Kentucky has a detailed list of exemptions that allows you to make certain property unavailable to your creditors. You should speak to a qualified attorney about what you can reasonably expect to keep in a Chapter 7 bankruptcy.
Chapter 13, on the other hand, is commonly referred to a reorganization bankruptcy. You can keep your property by successfully completing a court-approved repayment plan of three to five years. After completion of the plan, remaining unsecured debt (medical bills, credit card debt, etc.) can be discharged – which means you don’t have to pay it back.
Chapter 13 is typically best for folks with income and who want to protect their home and other important assets.
A knowledgeable bankruptcy attorney can help you use a Chapter 13 bankruptcy to fix defaults on mortgages and car payments and similar secured debt.
Sit down with an experienced lawyer from Louisville’s O’Bryan Law Offices to talk about which type of bankruptcy you are eligible for and which one suits your situation best.