Chapter 7 Bankruptcy: Liquidation of Assets and Discharge of Debts
Bankruptcy under Chapter 7 is also known as liquidation. It's a process where debtors surrender all their non-exempt assets, except for certain items like household goods and clothing, to the court. The remaining debts are then discharged, meaning they will no longer be owed.
- Exemptions:
- Jewelry valued at $1,300 or less: exempt
- Household goods and personal property (up to a certain value): exempt
- Cash and bank accounts
- Retirement accounts (e.g., 401(k), IRA)
Chapter 13 Bankruptcy: Repayment of Debts over Time
Chapter 13 is a type of bankruptcy that allows debtors to create a repayment plan. The debtor must file for Chapter 13 within three and a half years after the date of discharge from Chapter 7. Debtors will have two years to complete their repayment plan, which can be six or 24 months.
- Exemptions:
- Property that is exempt under Chapter 13 (e.g., primary residence, car): exempt
- Unsecured debts: not exempt