The bankruptcy code offers vital relief to borrowers struggling with financial burdens they cannot repay. It allows them to discharge some accounts, make up arrears on others, and potentially prevent foreclosure and repossession. Because no two financial situations are exactly alike, the law provides two primary options for consumers, each designed to assist borrowers with different types of debts. Understanding the difference between these bankruptcy programs ensures you get the maximum benefit out of filing.
Chapter 7 Bankruptcy
The most common and popular of the programs is chapter 7, also known as “liquidation.” A chapter 7 bankruptcy allows borrowers to completely discharge most unsecured debts, including unpaid medical bills, credit cards, and other consumer accounts, as well as some back taxes and legal judgments. In exchange, the trustee of the court may seize some of your belongings to pay back your creditors, especially if you own significant material or investment assets. However, the law makes a wide variety of property exempt from seizure, so many petitioners can discharge their debts without surrendering any of their belongings.
Chapter 13 Bankruptcy
Unlike chapter 7, a chapter 13 bankruptcy is designed for those who have sufficient income to pay back past due amounts on secured debts, such as vehicle loans or mortgages. To qualify, petitioners must submit a detailed repayment plan to the court, which will collect the funds on a monthly basis and disburse them to your creditors. In addition, most unsecured debts can also be eliminated, although creditors must receive at least as much as they would have if you had filed for chapter 7 protection.
Filing for bankruptcy can be confusing, emotional, and difficult, which is why every petitioner should hire a trusted attorney to guide them through this process. The Law Office of J. Baron Groshon has over 28 years of experience, helping borrowers throughout North Carolina reclaim their lives from debt. We have offices in Charlotte, Concord, Gastonia and Lake Norman to better serve you. Visit the website now to learn more about your options for bankruptcy or call (704) 342-2876 to schedule your free initial consultation.