The Law Office Of
Tyson Takeuchi
Bankruptcy and Debt Relief Specialist
Serving California since 1995
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800.553.4080
State Bar #177419
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Chapters 7 and 13

The Tyson Firm specializes in two chapters of Title 11 of the U.S. Bankruptcy Code:

Chapter 7

Chapter 7 bankruptcy is for individuals or entities whose expenses are greater than its income. It is the most common bankruptcy filing in the country, and the economic hardships necessitating it are wide and many. People experiencing sudden illness, tax debts and, increasingly, unemployment turn to chapter 7 bankruptcy for the discharge of their debts and a fresh start.

Also known as a liquidation bankruptcy, chapter 7 allows for the sale of a debtor's "non-exempt" assets to pay off the debt. A debtor may, however, claim over $21,000 exemptions on his or her property to prevent . The vast majority of chapter 7 debtors do not possess more than $21,000 in assets to begin with, do not lose a single item of property to liquidation, and still enjoy the possibility of a discharge of their debts.

Upon filing of a Chapter 7 bankruptcy, all attempts to collect on a debt by the debtors creditors are immediately prevented by the "Automatic Stay," one of the most powerful tools available to bankruptcy debtors. The automatic stay is an enjoinder that prevents any collection attempt by a creditor, whether it be a repossession, foreclosure, garnishment or levy to allow for the debtor's debts to be resolved by the bankruptcy. Any creditor who attempts collection efforts while the stay is in effect may be subject to penalties imposed by the Court.

Chapter 13

People in receipt of a Notice of Trustee Sale, Notice of Default, or in need of protecting assets in danger of repossession often consider Chapter 13 bankruptcy. Commonly known as "individual debt adjustment", "individual debt consolidation", or "repayment plan". A Chapter 13 can only be filed by individuals. A typical case generally involves someone who has fallen behind in his mortgage payments, become delinquent with his priority taxes, or has debts that are generally non-dischargeable in a Chapter 7 (student loans, child support arrears, taxes and others).

Filing a Chapter 13 plan of reorganization takes into assumption that the individual has a source of income. Such income exceeds the individual's household expenses. In essence, the individual has disposable income to be able to fund the plan of reorganization over 36 or 60 months.

Think of Chapter 13 as debt consolidation with a few perks. No more, no less. While paying back one's debt may not sound like an advantage, a chapter 13 debtor has the power to propose a payment plan that, with the court's approval, all creditors must accept. Depending on the debtor's income, this plan may pay back only a small fraction of the total debt. Upon successful completion of the bankruptcy, any remaining unpaid debt may be discharged by the Court.

Chapter 13 has additional perks. Only in this type of bankruptcy can a homeowner strip--or avoid--a second deed of trust from their home. Doing so requires that the value of the home be less than the principal owed to the first trust deed holder.

Finally, the automatic stay comes into play in chapter 13 cases as well. Paired with its ability to force creditors into accepting payments according to a plan proposed by the debtor, chapter 13 is especially well-suited to saving homes from foreclosure and paying back federal and state tax debts.

Have more questions? Call us! (800) 553-4080