There are two different types of consumer bankruptcy, and they mean two different things. You can be made to go from one to the other, but that only goes one way. You can also be denied a discharge of your bankruptcy. What this all means when you put it together is that you need to be certain that you can no longer afford to pay your debt. In most cases, you will need the assistance of experienced bankruptcy attorneys to figure out whether a Chapter 7 or Chapter 13 bankruptcy is best for you. Our lawyers can also go a long way toward helping you make sure that everything that needs to be included in the bankruptcy is included in it.
Discharging Debt in Bankruptcy
When a debt is discharged, you are no longer responsible for it. That doesn’t mean it was paid in full or that it looks good on your credit report. It simply means that you no longer have that particular obligation to that particular creditor. This is why Chapter 7 bankruptcy is also known as the discharge bankruptcy. If you file a Chapter 7 bankruptcy case and it is discharged by the court, all of the debts you included in the filing are now discharged. Just keep in mind that discharging debt doesn’t always discharge your responsibility.
Secured Debts and Bankruptcy
If you have secured debts, your creditors have a right to collect whatever security was offered when you applied for the credit. For many homeowners, this could mean that the house they filed on is no longer theirs to own. With other secured debts, things that were bought on credit lines may not be collected, although the creditor does have a right to them. For example, if you got a loan for a set of living room furniture, your creditor may not collect the actual furniture, but they do have a right to under Chapter 7 bankruptcy terms. This type of bankruptcy is for people who have minimal income and would not even be able to repay the reduced amounts resulting from a Chapter 13 bankruptcy case. Click here for more Chapter 13 information.
Reorganizing Debt in a Chapter 13
When debt is reorganized, it means that it is put into terms that may make the debt a bit easier to pay off. Such is the case when it comes to a Chapter 13 bankruptcy. Chapter 13 bankruptcy does not discharge debts immediately. Instead, it allows the individual to repay the debt with reduced payments. This type of bankruptcy is for people who aren’t in such a severe state as to qualify for Chapter 7 bankruptcy, but who may take a significant financial loss if they do make their payments while creating a significant financial burden for their creditors if they don’t. For example, if you get behind on your mortgage payments, but you can technically still afford to make a mortgage payment, you would use this type of bankruptcy to lower your payments and keep the house.
Switching from Chapter 7 to Chapter 13
In some cases, a person might file Chapter 7 bankruptcy, but the court may find that they are able to make payments of some sort. In such cases, the court may then convert the Chapter 7 to a Chapter 13. This is another reason it’s crucial to your case and your future that you have experienced bankruptcy lawyers to help you navigate the process.