Law Office of Robert N. Kitay
Sacramento Bankruptcy Lawyer | Sacramento Bankruptcy Attorney
Unless you're a farmer or you're incorporated, you likely have just two bankruptcy options at your disposal: Chapter 7 and Chapter 13. Which should you choose? The answer depends on a number of case specific factors. Call us for details.
Chapter 7 Bankruptcy
A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.
Chapter 7 bankruptcy may be a good option if: you don't own a home, you don't own other major non-liquid assets, you have a low to moderate income stream, and you have a variety of unsecured debts (e.g. passed due medical bills, debt on credit cards, money owed to private creditors)
Chapter 13 Bankruptcy
A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." (1) If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the law forbids creditors from starting or continuing collection efforts.
Chapter 13 bankruptcy might be a good option if: you want to keep your home (e.g. protect against foreclosure), or you have other significant non-exempt assets.
If you are having financial hardship and are considering filling for bankruptcy, call (916) 266-0188 for a FREE confidential bankruptcy consultation.
"We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code."
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