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Explanation of Chapter 7 & 13 Proceedings


Bankruptcy has become a very relevant field in recent weeks; qualified people should not hesitate to avail themselves of its benefits. However, individuals commonly find themselves uncertain as to whether they qualify to file for bankruptcy proceedings and others commonly refuse to file out of fear of the end result. Unfortunately, these individuals often forgo their constitutional rights much to their detriment. In particular, a debtor in a Chapter 7 or 13 proceeding is afforded an immediate stop on any debt-collection or eviction actions. Moreover, one may qualify for bankruptcy regardless of whether one's spouse also qualifies, or even in light of an earlier bankruptcy filing depending on the type of prior proceeding that was commenced and when it occurred.

Under a Chapter 7 liquidation proceeding, a debtor may discharge many of his or her secured and unsecured debts allowing for a fresh financial start. Although this type of proceeding requires the selling of various assets, certain pieces of property are exempt and may be retained by the debtor after the proceeding. These types of exempt property may include one’s home, car, mobile home and other personal effects.

Individuals and sole proprietors who have regular income, which is defined as income that is sufficiently stable to make re-payments of debts, may qualify for a Chapter 13 bankruptcy. This type of proceeding does not require the liquidation or sale of assets, but rather requires the debtor to enter into an arrangement to repay most or all of the debts owed over a period of time.

Regardless of the type of proceeding referenced in today’s blog, the debtor must prepare in advance of instituting a bankruptcy proceeding to satisfy certain pre-filing considerations. These considerations include, but are not limited to, the amount of debt owed, the completion of an approved credit counseling class, whether luxury goods were purchased within 90 days of the order for relief, whether cash advances of consumer credit was extended within 70 days of filing the proceeding.

If you find yourself in financial difficulties and are unaware of your rights or how to prepare in advance of filing a bankruptcy proceeding, please do not hesitate to contact us for a complementary initial consultation.