Unlike in a Chapter 7 bankruptcy, where a debtor may have certain non-exempt assets liquidated, in a Chapter 13 bankruptcy, the debtor maintains possession of assets. There is no liquidation of assets in a Chapter 13 bankruptcy.

This distinction serves an important purpose for individuals who need to seek relief under the Bankruptcy Code but do not wish to lose an asset that may be non-exempt. Let’s say for example, your prized possession is a piece of hunting land up north, with a fair market value of $10,000. Let’s assume this property cannot be exempted or otherwise protected in a possible chapter 7 bankruptcy. In a chapter 7, the Trustee could force the sale of the land and then distribute the proceeds to your creditors. Under chapter 13, you can keep the land by paying off its fair market value through a bankruptcy repayment plan. For example, over 36-60 months, you would pay into the plan the sum of $10,000, the fair market value of the land. These funds would then be distributed to your creditors and you would keep your land, your prized possession. Upon completion of your plan, whether the plan is 36,48, or 60 months, any debts not paid off pursuant to the plan would be discharged.

This feature of Chapter 13 is of great utility in a situation where assets are plainly non-exempt or where because of uncertainty in value, such assets may or may not be exempt. In certain cases where it is possible that a client could “lose” an asset in a Chapter 7 bankruptcy, we file a Chapter 13. This allows for the best of all worlds…the client keeps his assets and his debts are discharged through the bankruptcy process.