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Bankruptcy law gives struggling individuals two different options for reducing the burden of unmanageable debt. Depending on your financial situation and the types of debt you carry, either a chapter 7 or chapter 13 may be the ideal choice for restarting your financial life. Understanding the difference between these two programs is key to ensuring you make the best choice.

What to Know About Chapter 7 & Chapter 13 Bankruptcy

Chapter 7 Liquidation

Chapter 7 bankruptcy is designed for borrowers who don’t have the resources to pay back their credit cards, personal loans, and other unsecured debts. In exchange for surrendering some of your assets, the court will eliminate most of these accounts, essentially allowing you to wipe the slate clean. State and federal bankruptcy laws also make some personal property exempt from seizure, so many borrowers can attain debt relief without giving up everything they’ve worked hard to achieve. To qualify for chapter 7 bankruptcy, you must pass a means test, which usually entails proving that your income is below the state average.

Chapter 13 Liquidation

bankruptcy lawUnlike a chapter 7, chapter 13 bankruptcy is intended to help those with sufficient income pay back past-due amounts on secured debts. Through a court-managed payment plan, a chapter 13 may allow you to prevent foreclosure and repossession, while eliminating most unsecured debts. Each creditor must receive at least as much as they would have in a chapter 7 filing. To be approved for a chapter 13 filing, your petition must show that you have enough resources to make this option feasible. 

 

If you’re buried under mounting debts, Gilbert P. Kaback, Attorney at Law has the bankruptcy law expertise to help you find relief. This legal team has been serving Colchester, CT, for 22 years, providing peace of mind and effective legal counsel at fair and affordable prices. With compassion and attentive service, they’ll help you get back on your feet. Visit their website for more on their bankruptcy law services, or call (860) 537-0874 to schedule a consultation today.

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