Bankruptcy Blog For You

The situation to file for bankruptcy rises when a person fails to manage to his or her finances well. It is an easy way out of debt. However, filling bankruptcy is a very complicated process. But many people does not consider the availability of alternatives to bankruptcy. Bankruptcy has its own effects on debts. Here we will see how debts are treated in Chapter 7 and Chapter 13:

Effects of bankruptcy on debts with respect to Chapter 7

When Chapter 7 bankruptcy is filled, the victim has to sell all or most of his or her assets in order to pay the creditors. Only the exempted assets are not sold. Those assets can be anything; it can be the car home etc. On the other hand, the assets that are to be sold off to reimburse the creditors must have adequate equity so that the amounts raised are enough to pay off the creditors. In certain states, a person also has the option to choose between the federal exemption and state exemption. However, he or she cannot choose the both type of exemption. This varies from state to state. And in Chapter 7 only unsecured debts are eliminated.

Effects of bankruptcy on debts with respect to Chapter 13

When Chapter 13 bankruptcy is filled, there is no need to sell the assets to pay the outstanding amount to the creditors. Here the victim is given a repayment plan to pay off the debts. The maximum time limit is five years. And at the same time then one who has filled bankruptcy must have a stable income to qualify. Debts like auto loans, mortgage, credit card debts are consolidated. According to rules, Chapter 13 bankruptcy filling should include all outstanding debts.