2022 AFBA Financial Planning Guide

effect the petitioner is allowed to continue their life in a normal manner free of creditor harassment. For the creditor, Chapter 13 provides a structured repayment schedule with a reasonable assurance of receiving the agreed payments. b. Chapter 7. This approach is used by individuals when they have no possibility of repaying their debt. The court will appoint a trustee who will seize the petitioner’s non- exempt assets, sell them, and distribute the proceeds to the creditors. State laws vary widely regarding the assets that are exempted from seizure. For example some states do not allow the filer to retain any equity in their home while other states exempt all of the home equity that a petitioner has accumulated. In short, under Chapter 7, the debtor forfeits most of their assets and is legally released from most of their debt.


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