What is the difference between a Chapter 7 and a Chapter 13 bankruptcy? How will I know which one I qualify for?
Chapter 7 Bankruptcy is appropriate for most people and is the most effective means of “wiping the slate” clean of outstanding debt. Most people with modest incomes qualify for a Chapter 7 bankruptcy. The IRS sets the means standard for income qualifications. In Chapter 7 you are relieved of all of your unsecured debts (such as: credit card bills, medical bills, deficiency balances or repossessed cars or foreclosed homes, and personal loans) and any secured debts in which you are returning the property to a creditor. Secured debts are those debts that are tied directly to a specific piece of property. For example, a car that you are making payments on is still owned by the bank. If you decide to relinquish this property or it is repossessed the amount that you still owe can be included in your bankruptcy. If your income precludes you from filing a Chapter 7 bankruptcy you will then file a Chapter 13 bankruptcy. In Chapter 13, a repayment plan is devised between you, the court, and the
