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CHAPTER 7 & 13 BANKRUPTCY (New York) Differences between Chapter 7 and Chapter 13 Under Chapter 7, all the Debtor's non-exempt property becomes property of the trustee, the trustee then liquidates that property and distributes the proceeds to creditors. The Debtor receives a discharge, which usually results in the discharge of all credit cards and medical bills. Under Chapter 13, the Debtor remains in possession of ALL their property and must pay to creditors over a 3 to 5 year period what they would have received if the debtor were to liquidate in chapter 7 plus any disposable income. The Debtor receives a discharge of most remaining debts after completion of the plan. When to enter Chapter 13 Chapter 13 is usually preferable for a Debtor who:
What is a Trustee in bankruptcy? Trustees are Attorneys appointed by the Office of the United States
Trustee of The Department of Justice to oversee the Bankruptcy Estate. The Chapter 13 Plan A debtor must pay to creditors in the chapter 13 plan, what creditors would receive if the debtor were to liquidate pursuant to chapter 7. Thus, creditors receive the value of the debtor's non-exempt equity in assets over the course of a 3 to 5 year plan. If the debtor is not paying 100% to all claims, the debtor must also place any additional disposable income into the plan. Secured Creditors - Arrears owed to secured creditors can be cured within the chapter 13 plan. It is important to understand that a creditor has a secured claim only to the extent of the value of its security, which cannot exceed the value of the property that is secured by the claim. A Debtor's payments are expected to begin exactly 30 days after filing for relief under chapter 13. Special eligibility rules for Chapter 13 The Code considers chapter 13 a privilege rather than a right. Thus, the benefits of Chapter 13 are only granted to certain individuals who meet these requirements:
When does a Debtor have to appear in Court? Meeting of the Creditors - Both chapter 7 and chapter 13 debtors have to appear at this meeting with the trustee. This meeting is part of the investigative process of the trustee where they ask any questions pertinent to administrating the estate. A chapter 7 trustee typically asks questions aimed at uncovering assets of the debtor. A chapter 13 trustee typically asks questions aimed at assessing the feasibility of the chapter 13 plan. Hearing on Confirmation - A chapter 13 debtor is normally expected to appear at the Hearing on Confirmation of their Plan. This takes place in the Bankruptcy Court in front of the Bankruptcy Judge and if all applicable requirements are met, the debtor's plan is confirmed and the trustee begins distributing the proceeds to creditors. Court filing fees The current filing fees are $200 for chapter 7 and $185 for chapter 13. Unlike chapter 13 where the debtor is required to pay commissions to the chapter 13 trustee, this is the only non-attorney fee that the chapter 7 debtor will incur through the bankruptcy process. The Automatic Stay Filing for Bankruptcy under any chapter immediately and automatically stays (stops) all lawsuits, attachments, garnishments, foreclosures, and other actions by creditors against the debtor or the debtor's property. Within a few days after the case is filed, the Court will mail a notice to all creditors advising them of the automatic stay. Certain creditors should be notified by the debtor's attorney sooner (such as a mortgagee with an impending foreclosure action). The role of the Debtor's Attorney Typical functions of the Debtor's Attorney for Chapter 7 and 13 Debtors might include:
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