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Basics of Chapter 7 and 13 plans

Consumers who live in North Carolina who find themselves under a growing rather than diminishing mound of debt may wonder if filing for bankruptcy is right for them. In assessing this, they will also need to understand the two types of consumer bankruptcy and how they differ so that they can make the right selection for their current situation and for their future.

As explained by Experian, a Chapter 7 bankruptcy is perhaps the most commonly used and known. This is often called a liquidation bankruptcy as some assets may be seized and sold, or liquidated, in order to repay some creditors for secured debts like automobile loans. For things like credit card debt that have no associated collateral, this liquidation process does not take place. indicates that no such asset seizure or liquidation happens with a Chapter 13 bankruptcy. For this reason, these plans tend to be popular with consumers who own homes and want to avoid losing them in foreclosure proceedings.

A Chapter 7 bankruptcy may be completed in as little as a few months and all debts included in the plan are discharged once complete. These bankruptcies can be effective for people with predominately unsecured debt versus secured debt. A Chapter 13 bankruptcy lasts between 36 and 60 months. During this time, the consumer makes monthly payments to a trustee who then makes payments to creditors to repay at least a portion of what they are owed. The consumer is responsible for maintaining any mortgage payments directly with their bank during this time.


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Sigmon & Henderson, PLLC
518 S New Hope Road
Gastonia, NC 28054

Phone: 704-269-6374
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