Chapter 7 bankruptcy is basic liquidation for individuals and businesses. In a Chapter 7 bankruptcy, some of your property may be sold to pay down your debt. In return, most or all of your unsecured debts (that is, debts for which no property has been used to guarantee the debt) will be erased. You are able to keep property that is classified as exempt under the state laws where you reside or the default federal laws (such as your clothes, car, and household furnishings).
Not everyone can file for Chapter 7 bankruptcy. Though bankruptcy can eliminate many kinds of debts, such as credit card debt, medical bills, and unsecured loans, there are many types of debts, including child support and spousal support obligations and most tax debts, which cannot be wiped out in bankruptcy.
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Chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts. A Chapter 13 does not completely eliminate debt, but consolidates and restructures the debt into a monthly payment plan that is more affordable. The payment plan is usually established for 3 to 5 years. The minimum amount you'll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you'd filed for Chapter 7 bankruptcy.
Your debts must be within limits set by the federal government: Currently, you may not have more than $1,010, 650 in secured debt and $336,900 in unsecured debt.
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