Chapter 7 and Chapter 13 Bankruptcy Basics

Bankruptcy is a process in which consumers and businesses can eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. For the most part, bankruptcies can be divided into two types — liquidation and reorganization.

Chapter 7 bankruptcy comes under the liquidation category. It’s called liquidation because the bankruptcy trustee may take and sell (“liquidate”) some of your property to pay back some of your debt. However, you may keep property that is protected (also called “exempt”) under state law. In fact, most “debtors” who file Chapter 7 do not lose any property because the exemptions in California are generous.

There are several types of reorganization bankruptcies, but Chapter 13 is the most common type for consumers. In Chapter 13 bankruptcy, you keep all of your property, but you must make monthly payments over three to five years to repay all or some of your debt. An added advantage of Chapter 13 is the ability to strip (void) a second mortgage or home equity line of credit.

Both Chapter 7 and Chapter 13 bankruptcy have many rules — and exceptions to those rules — regarding which debts are covered, who can file, and what property you can and cannot keep. Therefore, it is important to discuss your options with an experienced bankruptcy attorney. Call the Law Office of Jeremy F. Peck for your no obligation free consultation at (831) 224-3199.

Law of Office Jeremy F. Peck
220 Capitol St.
Salinas, CA 93901