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| The Difference Between Chapter 7 and Chapter 13 |
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Bankruptcy is a legal procedure that
provides debt relief to consumers who cannot pay their bills. The decision to file for
bankruptcy is a serious step, and is usually taken when other efforts to correct
financial difficulties have failed. Most consumers who declare bankruptcy do so
under Chapter 13 or Chapter 7 of the U.S. Bankruptcy Code.
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Chapter 13 or "reorganization" allows debtors with a steady income to pay off all
or part of their debts over a 3 to 5 year period instead of surrendering property.
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Chapter 7 or "straight
bankruptcy" is the most drastic type of bankruptcy. Debtors turn over to a court
representative all of their assets for distribution to creditors. Unlike Chapter
13, there is no repayment plan, and the court will then declare that legally the
debtors are no longer in debt.
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