If the non-bankruptcy alternatives are not feasible, most consumer debtors must choose between a liquidation proceeding under Chapter 7 of the Bankruptcy Code and a debt adjustment proceeding under Chapter 13 of the Bankruptcy Code.

While a Chapter 7 Bankruptcy and Chapter 13 Bankruptcy in Sacramento both offer benefits to the individual consumer, each type of bankruptcy provides the individual consumer with differing types of benefits. While some of the benefits of one type of bankruptcy verses another type are different, they both provide the consumer with the opportunity for a fresh start and new lease on life. Choosing between which bankruptcy best suits your situation will depend on your long term and short term goals.

Other than the possibility of repaying your debts, the other significant factor between Chapter 7 and Chapter 13 is that, with Chapter 7, you can be forced to have valuable assets liquidated in order to help pay off any debts. Using Chapter 13, this would not be necessary, since you are already entering into a repayment agreement with your creditors. So, if you have a house, car, or other things that you own outright and want to keep, it is best to file Chapter 13 over Chapter 7.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common type of bankruptcy for individual filers, the epitome of what people think of when they hear the term “bankruptcy”. Chapter 7 is basically a liquidation of all your assets that aren’t protected against creditors during bankruptcy proceedings.

This is the part of the bankruptcy statute that’s designed to eliminate debt and wipe out old bills. If an individual has more credit card debt, personal loans, payday loans and other unsecured debt that is too much for them to continue to make payments on or too large amounts to ever get repaid, then Chapter 7 is the answer.

If Chapter 7 is filed correctly, using the Bankruptcy Code to the best of one’s ability, some assets can be retained, while severe debt will be removed. It is the quickest and simplest form of bankruptcy available.

Chapter 13 Bankruptcy

Generally, many people are good candidates for Chapter 13 bankruptcy. If you are behind on your mortgage or car loan, and want to make up the missed payments over time and reinstate the original agreement, Chapter 13 may be for you. You cannot do this in Chapter 7 bankruptcy. You can make up missed payments only in Chapter 13 bankruptcy.

Chapter 13 is a different type of bankruptcy that generally allows individuals to keep all of their property if they agree to repay creditors to the extent they can afford to do so over a three to five year period. Often times, people fall behind on their mortgage, automobile, or credit card payments due to illness, divorce, loss of work or other unforeseen circumstances. Chapter 13 allows those individuals to bounce back and save their home from being foreclosed upon, vehicles from being repossessed or wages from being garnished.

Sacramento Bankruptcy Law Firm

The skilled bankruptcy attorneys of Bowman & Associates help clients across California from their offices in Sacramento and Folsom. If you or someone you know has legal questions regarding bankruptcy and debt collection, contact their experienced Chapter 7 and Chapter 13 lawyers for a free consultation.