|A legal proceeding in federal court in which a debtor who is unable to meet his or her financial obligations has his or her debts discharged relieving them of the obligation to pay. The debtor's assets are liquidated with the proceeds going to the debtor's creditors. Phoenix Bankruptcy Attorneys
Chapter 7 bankruptcy liquidates the debtor's assets and relieves them of further liability. Chapter 13 also liquidates assets, but requires payments on the existing debt for three to five years after which the remaining debt is discharged.
For a debtor who is current on their house payments bankruptcy can allow them to keep the house. For those behind on house payments Chapter 13 can stop foreclosure and allow the debtor three to five years to catch up on their payments.