In a chapter 7 bankruptcy, or liquidation bankruptcy, any assets you own that are not exempt would be sold by the chapter 7 trustee and used to pay your creditors. However, in practice, very few people have non-exempt assets. This is what is called a No Asset chapter 7 case. There are no assets being disbursed and the end result is the discharge of all debts except those excluded from discharge, such as student loans, most taxes, child support arrearage, and judgments related to driving and car accidents.
The people most likely to qualify for chapter 7 bankruptcy are those whose income is about the same as their living expenses or even less than their expenses. If someone can save money each month, you probably will not qualify for a chapter 7 bankruptcy.
What Then Is A Chapter 13 Bankruptcy And Who Is This The Best Option For?
Chapter 13 bankruptcy is one in which we figure out how much a person can afford to pay each month toward their debts. Then we decide how that amount will be distributed to creditors. Deciding which creditors are paid through the chapter 13 bankruptcy is complex and depends on the individual’s circumstances.
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