Most Garnerville and Rockland County residents who follow this blog probably know that Chapter 7 and Chapter 13 are types of personal bankruptcy but that they are different. While Chapter 13 bankruptcy and Chapter 7 differ in many ways, there are a couple which really stand out.
Perhaps the most important difference between the two is that Chapter 13 allows a New York resident in financial trouble to keep most all of his or her assets during a bankruptcy but instead requires the person to turn over a set portion of his or her income each month for three to five years. This portion of income, which works a lot like a wage garnishment, goes to re-pay some of the person’s debts.
A Chapter 7, which is the more common type of bankruptcy, does not require a person to turn over income and, in fact, is usually a means of stopping garnishments. However, a person who files Chapter 7 must surrender all non-exempt pieces of property to the bankruptcy trustee so they can be sold and turned over to creditors. Usually, a Chapter 7 bankruptcy will last only for a few months or, in the simplest cases, a few weeks.
Another big difference is how certain creditors get treated. For example, in a Chapter 13, it is a lot easier to effectively get rid of a second or third mortgage on a home without having to worry about foreclosure. Moreover, some debts which do not get discharged in a Chapter 7 bankruptcy can be discharged in a Chapter 13.
Chapter 7 and Chapter 13 are two different vehicles through which New York residents can get relief from debt. Which one is right for a particular family, however, is usually best discussed between that family and a qualified and experienced New York bankruptcy attorney.