Why would a debtor choose to pay creditors something in a Chapter 13 proceeding rather than get discharged outright in a Chapter 7 proceeding?
• To avoid liquidation of assets. In a Chapter 13 proceeding, the bankruptcy trustee assigned to the case does not have the authority to liquidate assets; the debtor may keep all of his or her assets. However, as noted above, the debtor must pay creditors the value such assets would have had to creditors had such assets in fact been liquidated by a hypothetical Chapter 7 trustee had the debtor filed Chapter 7. And the debtor is given up to sixty months within which to pay creditors for those assets. For example, say the debtor owns a business as a sole proprietorship and the business has accounts receivable, inventory, and equipment, above and beyond all liens, leases, and available exemptions, worth $30,000. If the debtor files Chapter 7, it is probable that the Chapter 7 trustee will liquidate such assets for the benefit of creditors. Not only would the Chapter 7 trustee be taking the debtor’s primary asset, but is interrupting, perhaps irretrievably, the debtor’s cashflow, i.e., the
• To avoid liquidation of assets. In a Chapter 13 proceeding, the bankruptcy trustee assigned to the case does not have the authority to liquidate assets; the debtor may keep all of his or her assets. However, as noted above, the debtor must pay creditors the value such assets would have had to creditors had such assets in fact been liquidated by a hypothetical Chapter 7 trustee had the debtor filed Chapter 7. And the debtor is given up to sixty months within which to pay creditors for those assets. For example, say the debtor owns a business as a sole proprietorship and the business has accounts receivable, inventory, and equipment, above and beyond all liens, leases, and available exemptions, worth $30,000. If the debtor files Chapter 7, it is probable that the Chapter 7 trustee will liquidate such assets for the benefit of creditors. Not only would the Chapter 7 trustee be taking the debtor’s primary asset, but is interrupting, perhaps irretrievably, the debtor’s cashflow, i.e., the
