Everybody who needs to file chapter 7 or chapter 13 bankruptcy needs reliable information about these bankruptcy chapters.
First of all, it is important to know that each of the bankruptcy chapters of the United States Bankruptcy Code is designed to offer consumers with a specific set of circumstances protection under the laws described in the various bankruptcy chapters.
As most people know, whether a consumer or corporation has to file chapter 7 or chapter 13 is not a matter of choice; it depends on the debtor’s specific situation, including the type and amount of debt, whether he possesses valuable assets, and what his income is.
In order to determine which of the bankruptcy chapters applies, debtors are obliged to take a mandatory means test before filing their bankruptcy petitions with the bankruptcy courts. If a consumer doesn’t agree with the outcome of the means test, he can appeal the decision in an attempt to qualify for one of the other bankruptcy chapters.
Chapter 7 is different from chapter 13 and because it involves the liquidation of a debtor’s assets in order to pay off his creditors. Chapter 13 involves a reorganization of the debtor’s assets and debts.
A liquidation bankruptcy reverts to selling a debtor’s items because the court determines, based on the debtor’s income, that he does not have sufficient funds to support a repayment plan to pay his creditors over an extended time period.
Both the other bankruptcy chapters are based on the debtor’s ability to make monthly payments to his creditors, which usually allows him to retain certain valuable assets as well as, in the case of corporations, stay in business.
All proceedings regulated in chapter 7 and chapter 13 are supervised by the bankruptcy courts to ensure that the specific rules and regulations are followed by every individual or corporation that files for bankruptcy.