Kinlaw Cunningham And Ward, LLC



Consumer Bankruptcy Overview

02 July

What is a Bankruptcy?

In general, bankruptcy is a way for debtors (people who owe money) to get rid of debt which they cannot afford to repay. However, the Bankruptcy Code gives debtors several options to achieve this goal. These different options are written into the bankruptcy laws as different chapters and are commonly referred to as Chapter 7 and Chapter 13 bankruptcies. The biggest difference is that a Chapter 7 bankruptcy is for debtors with no means to pay back their debt, while a Chapter 13 allows people with income to restructure their debt obligations. There are many differences between these two types of bankruptcy, but the main differences are highlighted below.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is commonly called a “liquidation bankruptcy.” In short, a Chapter 7 bankruptcy allows debtors to liquidate assets that they do not need to live (if any), in order to pay creditors. Truthfully, most debtors do not have any assets worth liquidating, so most people who file a Chapter 7 retain all their property. With a few exceptions, as long as debtors are honest about their assets and are cooperative in the bankruptcy process they will receive a discharge once the case is closed even if their creditors receive no money. A “discharge” means that you are no longer liable to pay the debts that you had on the date your case was filed. Typically, a Chapter 7 bankruptcy case lasts between 4-6 months, but can last much longer if the debtor has assets to liquidate.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is a very different type of bankruptcy. Often called a “reorganization bankruptcy” or a “wage earners bankruptcy,” this bankruptcy allows debtors with the ability to pay some of their creditors the ability to propose a plan to pay back their creditors as best they can over a 3-5 year period. This plan must be approved by the Bankruptcy Court. The debtor’s then pay monthly payments to a Chapter 13 Trustee, who then pays their creditors. Bankruptcy law states that the debtor’s must contribute all of their disposable income, however, what constitutes disposable income can be a very confusing question. This is where an experienced attorney can help you reach a plan that will give you the best ability to make your payments and successfully complete the Chapter 13 bankruptcy. If the debtor can maintain their monthly payments through the duration of their proposed plan, then they will be granted a discharge upon the completion of the plan.

Contact Our Office Today

Obviously, bankruptcy law can be very difficult to navigate, so it is important to have the right attorney on your side to help you navigate through this complicated area of the law. If you find yourself in financial difficulty don’t wait until it is too late, please contact us at 864-399-7888 (Upstate) or 803-371-2747 (Midlands) to discuss your options.

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