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CHAPTER BY CHAPTER--- WHICH ONE'S BEST
FOR YOU?
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One thing about bankruptcy that confuses many consumers is the number of
Chapters of the Bankruptcy Code from which to choose. Although there are several
possibilities, most consumers work with their attorneys to choose between only
two choices – Chapter 7 and Chapter 13.
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Chapter 7 bankruptcy (also called a "straight
bankruptcy" or a "liquidation") is the simplest way to a fresh start, and it
is the most popular. Technically, the debtor's assets are to be taken and
sold so that the proceeds can be distributed to the debtor's creditors.
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In practice, however, most debtors do not lose any of their property. This is
because of many important exemptions which protect consumers. While there
are limitations to these exemptions, most consumers are able to keep all of
their belongings while reducing or eliminating their debt. You should be aware,
however, that certain debts such as tax bills less than three years old (from
the due date), child support, or alimony cannot be eliminated by filing
bankruptcy. Also, in most cases, student loans are not dischargeable.
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Chapter 13 bankruptcy (also called a "repayment plan") is generally used for
wage earners who have property that would not be exempt in a Chapter 7, or for
people who are behind on mortgage or car payments. It also can help people who
have debts that would not be discharged in Chapter 7. With a repayment plan, the
consumer makes payments to a Trustee, who distributes the money to the creditors
according to a Chapter 13 plan. The payments can continue from three to five
years.
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A Chapter 13 plan is based on the consumer's monthly income, monthly
expenses, debt, and property. Depending on these factors, consumers who qualify
pay back either part or all of their debts. As long as Chapter 13 consumers keep
up with the plan, they are able to keep their property.
BOTH A CHAPTER 7 AND CHAPTER 13 BANKRUPTCY WILL PUT A STOP
TO ANY
CREDITOR HARASSMENT, LAWSUIT, WAGE GARNISHMENT, OR FORECLOSURE!
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