Some differences between Chapter 7 and Chapter 13 bankruptcy

Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy.” If you meet the income limit, all of your qualifying debts can be wiped away. However, not all debts qualify for bankruptcy discharge.

Chapter 13 is often called the “wage earner’s bankruptcy.” The way it works is that the bankruptcy court helps you set up an affordable repayment plan for your debts. The plan generally lasts between three and five years. After you have successfully completed the plan, any remaining qualifying debts are wiped out.

Will I lose my house and car?

It depends on which Chapter you file under. If you have debts secured by collateral, like a house or car, the creditor will generally get to take the collateral if you file for Chapter 7.

In Chapter 13, you do have to pay the debts, but the creditor cannot take your collateral. Plus, as a part of your plan, any unpaid balance could be wiped out.

There are also exemptions in the law that may allow you to keep your home and vehicle even if you file Chapter 7. However, the exemption may only cover part of the value of your home or vehicle. In Chapter 13, the exemptions could change how much you have to pay your creditors.

Will I lose my other property?

In Chapter 7, you will generally have to surrender any valuable property you have that is not exempt from bankruptcy. This generally does not include your ordinary daily necessities. If you want to keep this property in Chapter 7, you may be able to pay for it outright.

In Chapter 13, you generally get to keep your nonexempt valuable property. If the property is secured by collateral, you can pay for it, with interest, over time as part of your plan.

Will my co-signer have to pay off my debt?

If someone co-signed for your personal loan, they are as responsible for the debt as you are, outside of bankruptcy. If you file for Chapter 7, the creditor can call on your co-signer to pay the debt. If you file Chapter 13, the creditor cannot call on the co-signer to pay while you are making your plan payments.

What types of debt cannot be discharged in either Chapter 7 or Chapter 13?

Some types of debt are exempt from discharge under most circumstances. These include:

  • Child support
  • Alimony
  • Student loan debt
  • Most tax debt

If you file for Chapter 7, these debts will not be discharged. If you file for Chapter 13, these debts can be included in your repayment plan. However, you would still owe any balance remaining at the end of your plan.

Should I wipe out my 401(k) plan to pay off my debts?

No. Tax-exempt retirement accounts like 401(k)s, 403(b)s and state teacher retirement systems, along with private pensions, IRAs and Roth IRAs are exempt from bankruptcy. The court will not take your retirement accounts to pay off your debts, and you shouldn’t give up your future financial stability.

You may have other questions about bankruptcy. Don’t hesitate to ask an experienced bankruptcy attorney how the process works, what property is exempt, and what you can expect to pay in a Chapter 7 or Chapter 13 bankruptcy.

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Mediation and Arbitration:  What to Know Before Taking a Dispute to Court When a legal dispute begins, many people immediately picture a courtroom, a judge, formal testimony, and a long timeline. While litigation is sometimes necessary, it is not the only path available. In many civil disputes, mediation or arbitration may offer a more focused way to address the issues, reduce conflict, and move toward a resolution without every step taking place in open court. Mediation and arbitration are often grouped together under the broader category of alternative dispute resolution. They are not the same process, and they do not serve the same purpose in every case. Understanding the difference can help individuals, families, business owners, and organizations have more informed conversations with their attorney before deciding how to proceed. What Is Mediation? Mediation is a confidential process in which a neutral third party helps the people or businesses involved in a dispute talk through the issues and explore possible solutions. The mediator does not decide the case for the parties. Instead, the mediator helps guide the discussion, identify areas of disagreement, and encourage practical communication. One of the main benefits of mediation is that the parties usually keep more control over the outcome. Rather than leaving the decision entirely to a judge, jury, or arbitrator, the parties work toward an agreement they are willing to accept. That does not mean every mediation ends in settlement. It does mean the process gives the parties a structured opportunity to evaluate risk, clarify priorities, and consider options that may not be available through a court ruling alone. Mediation may be used in many types of disputes, including business disagreements, contract issues, employment matters, family-related disputes, estate or probate conflicts, and other civil matters. Whether it is appropriate depends on the facts, the legal issues, and the parties' willingness to participate in good faith. What Is Arbitration? Arbitration is more formal than mediation. In arbitration, the parties present their positions to a neutral arbitrator, or sometimes a panel of arbitrators. The arbitrator reviews information, considers arguments, and issues a decision. Depending on the parties' agreement and applicable rules, that decision may be binding or nonbinding. Arbitration can sometimes be required by contract. Many business, employment, construction, and consumer agreements include arbitration provisions. These provisions may set out when arbitration is required, how the arbitrator is selected, what rules apply, and whether the decision is final. Because arbitration can affect important legal rights, it is important to understand the process before entering into it. A party may have limited appeal rights after a binding arbitration award. An attorney can help review the applicable agreement, explain the process, and prepare the presentation of claims or defenses. How Mediation and Arbitration Differ The simplest way to understand the difference is this: mediation focuses on facilitated negotiation, while arbitration focuses on decision-making. In mediation, the parties decide whether to resolve the dispute. In arbitration, the arbitrator may decide the outcome after hearing from both sides. Mediation is typically more flexible. The parties may discuss business concerns, personal priorities, timing, payment terms, confidentiality, or other practical terms that a court may not be able to order. Arbitration usually follows a more defined procedure, with evidence, argument, and a decision at the end. Both processes may help parties avoid some of the cost, time, and public nature associated with traditional litigation. However, neither process is automatically right for every dispute. The appropriate path depends on the facts, the documents involved, the relationship between the parties, and the legal risks that need to be considered. When Alternative Dispute Resolution May Be Worth Considering Mediation or arbitration may be worth discussing when the parties want a more private process, hope to preserve a business or personal relationship, want to manage litigation costs, or when a contract requires a specific dispute resolution method. These processes may also be useful when the parties need help narrowing the issues before trial. For example, a business dispute may involve more than a simple question of who is right or wrong. The parties may need to consider ongoing contracts, customer relationships, ownership interests, payment schedules, or future obligations. Mediation may allow room for creative terms. Arbitration may provide a more streamlined way to reach a decision when the parties cannot agree but want to avoid a full court trial. It is also important to consider timing. Waiting too long to evaluate dispute resolution options can make positions harder to move and costs harder to control. Speaking with an attorney early can help identify whether mediation, arbitration, litigation, or a combination of approaches should be considered. How an Attorney Can Help An attorney's role in mediation or arbitration is not limited to attending a meeting or hearing. Legal counsel can help evaluate the strength of claims and defenses, prepare documents, identify important evidence, discuss settlement considerations, and protect the client's rights throughout the process. Before mediation, an attorney may help a client clarify priorities, understand possible outcomes, and prepare for negotiation. During mediation, counsel can help evaluate proposals in real time and ensure that any potential agreement is reviewed carefully before it is signed. Before arbitration, an attorney may review the arbitration clause, identify deadlines, prepare the case presentation, develop strategies for witnesses and exhibits, and explain what a binding or nonbinding decision may mean. Because arbitration can be procedurally different from court, preparation matters. Speak With RLB About Your Options At Roderick Linton Belfance LLP, our mediation and arbitration practice is focused on helping clients understand the process, evaluate practical options, and move forward with informed decision-making. Every dispute is different, and no article can determine which legal strategy is appropriate for a specific situation. 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