The Federal Bankruptcy Code provides consumers with two forms of debtor relief. Chapter 7 of the code is the straight bankruptcy provision and provides for liquidation (conversion into cash) of the debtor’s assets.

With bankruptcy under Chapter 7, you give up the property you put up for collateral when using credit, unless the debts are reaffirmed by court permission and you continue to pay the creditor.

Chapter 13 is the wage-earner’s plan. With Chapter 13, you promise to pay existing debts with part of the income you will earn in the next few years. While paying the debts, you will be able to keep the things you bought on credit if your plan is approved by the courts.

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Content © Rich Brott, 2011

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