Bankruptcy is a process that enables people to walk away from some or all of their debts. It is an idea found in the Old Testament, and echoed within the Constitution.
Several types of bankruptcy exist, but for the average person, the most common are Chapter 7, and Chapter 13.
But what is the difference?
Chapter 7 bankruptcies truly represent a “fresh start” since those who file typically get to keep all of their belongings, jewelry, furnishings, vehicles, homes and retirement savings. These cases last only 3 to four months and typically involve just one court hearing. Chapter 7s are common because they are quick and straightforward.
Chapter 13 bankruptcies, on the other hand, are known as “repayment” or “partial repayment” plans. These are like the Chapter 11 cases filed by big companies. In Chapter 13s, clients pay back their creditors over a period of 3-5 years and sometimes end up paying only pennies on every dollar owed.
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