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Chapter 13 Bankruptcy: What Does Reorganization Mean?

There are very major and very important differences between petitioning for Chapter 13 bankruptcy and petitioning for Chapter 7 bankruptcy. The most important difference is that Chapter 7 bankruptcy liquidates your assets to pay off your debts while Chapter 13 bankruptcy reorganizes your debts to make your payments more manageable and to stop your creditors from harassing you.

When you declare Chapter 13 bankruptcy, you are not made to sell any of your assets, including your house, your car, or any other properties or possessions. Instead, you are asked by the bankruptcy court to submit a repayment plan that consolidates your debts and repays what you owe in three to five years. If you do not earn a regular wage, or if you have too much debt to pay back in five years, a Chapter 7 liquidation bankruptcy may be the more sensible choice for you. In fact, to qualify for Chapter 13 bankruptcy, you may not have more than $1,010, 650 in secured debt and $336,900 in unsecured debt. In addition you must earn a certain amount of money each month that you will use to make payments to your creditors.

Chapter 13 reorganization bankruptcy is a great choice for those who have a regular job and a regular paycheck - and who feel a moral obligation to repay their loans. In many cases, some people simply need a lower monthly payment and a plan in order to get out of debt - they do not feel the need to liquidate their assets and begin again. For those who simply want to stop the phone calls and letters from creditors, Chapter 13 bankruptcy accomplishes that while also laying out a plan for success.

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