The Wage Earner Bankruptcy vs. The Liquidation Bankruptcy
Today there are two common forms of bankruptcy relief, Chapter 7 and Chapter 13. Chapter 13 is sometimes called wage-earner bankruptcy. It seeks to stretch out payments so that they are achievable. Chapter 7 is referred to as liquidation bankruptcy. It is for people who are simply unable to pay their debt no matter how payments might be rescheduled.
Most individuals file under Chapter 7 or Chapter 13. Chapter 7 is designed for individuals with limited income and assets who wish to discharge unsecured debts, such as credit cards, personal loans, car loans/repossessions, and medical bills.
Chapter 13, which is a monthly payment plan used to repay some amount to creditors, may be used when the assets and/or income of the debtor(s) is/are in excess of what is permitted under Chapter 7. Unsecured creditors are seldom entitled to full payment through a Chapter 13 plan, and in most cases receive only a small percentage of the amount owed.
A Chapter 13 is often used to stop a foreclosure action, which can be done as late as the time of the Sheriff’s sale (although we prefer as much advance notice as possible), and cure a mortgage arrearage through the Court-administered payment plan.
Like Chapter 7 Bankruptcy, Chapter 13 triggers an instant automatic stay — a warning from the courts that you have filed for Chapter 13 and that no efforts may be made to collect on your debts while your case is in process.
Like Chapter 7, Chapter 13 allows for the discharge of some unsecured debt such as medical bills and credit card debt.
Unlike Chapter 7, Chapter 13 has the power to stop foreclosure in its tracks, provided it is invoked prior to the sale of your home.
Unlike Chapter 7, Chapter 13 does not relieve you of responsibility for paying your secured debts. You will have to make monthly payments to your trustee for three to five years. You may have to pay back a portion of your unsecured debt as well.
There are many differences between the two chapters, along with unique features and requirements of Chapter 13. Our PA bankruptcy lawyers will lay out a course of action for you, will do most of the application work for you and will keep you up to date as your case progresses.
Contact Our Stroudsburg PA Bankruptcy Lawyers
Contact our office today to discuss your bankruptcy issues with our experienced Stroudsburg bankruptcy lawyers. We are available 9 a.m. to 5 p.m. weekdays and by appointment. Call us at 570-421-9090, toll free at 800-506-0191 or fill out the online Bankruptcy law contact form to schedule an initial explanatory consultation with an attorney.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.