Chapter 7 and Chapter 13 are the most common types of bankruptcy protection there are for consumers. Chapter 7 is known as a “liquidation” bankruptcy and Chapter 13 is a repayment or reorganization plan.
Discharge of unsecured regular debt such as credit cards and personal loans is usually the end result in chapter 7 and chapter 13. In addition to Discharge, Chapter 13 provides certain functions that can’t be done in chapter 7, such as, repay (cure) mortgage or Homeowners Association arrears (past due payments) to avoid or stop foreclosure; cure car payment arrears to stop repossessions, and in certain situations reduce the car loan principal balance owed and/or interest rate; repay taxes or domestic support obligations (child support and/or alimony).
Chapter 7 is quicker and cheaper to handle than chapter 13. Therefore, it should be the preferred option for those who qualify (under a certain household income threshold) and don’t need to take advantage of the functions that can only be accomplished in chapter 13.
Therefore, if you are behind on your mortgage or car payments, facing foreclosure, owe taxes or domestic support obligations (child support and/or alimony) you should contact a Honolulu bankruptcy attorney to help you through this process, and keep reading because a Chapter 13 bankruptcy may be just what you need.