Receiving Payment Under Chapter 7

• When a debtor files for Chapter 7 bankruptcy, a bankruptcy trustee sells the debtor's assets and uses the money from the sale to pay creditors. The bankruptcy trustee cannot just sell any property, however. The trustee can only sell nonexempt property. In most cases, the Chapter 7 debtor has no property that is nonexempt. In those cases, the bankruptcy court grants the debtor a discharge, and the debtor's unsecured creditors do not receive payment.
  
  

Receiving Payment Under Chapter 13

• When a debtor files for Chapter 13 bankruptcy, the debtor repays his debts over time. Although you may not receive payment right away, as a creditor you will receive payments in monthly installments under the debtor's repayment plan. Under Chapter 13, most creditor claims are paid. The debtor will have to pay anywhere from zero to 100 percent of unsecured claims depending on the amount of disposable income he has each month.
  
  

Secured Creditors

• If you are a secured creditor, then you have very likely sold property to the debtor or loaned money to the debtor to purchase property. The debtor entered an agreement with you either to pay you for the loan or give up the property to you so that you can recoup the money by selling the property. A mortgage lender is a common secured creditor. In Chapter 7 bankruptcy, even if the debtor does not pay the secured creditor, the secured creditor can take the property that is securing the debt. Under Chapter 13, the debtor usually provides for payment of the secured debt in the debt repayment plan. If not, the creditor can take the property.
  
  

Unsecured Creditors

• If you are an unsecured creditor, you may not receive payment on the products or services you have loaned the debtor. This will be especially true if the debtor filed for Chapter 7 bankruptcy. If the debtor filed for Chapter 13 bankruptcy, you may receive some payment under the debt repayment plan. This applies to nonpriority unsecured debts. Priority unsecured debts must always be paid, however. Therefore, if the debtor owes you child support, alimony, student loan payments or criminal restitution for a drunk driving offense, then the debtor cannot discharge this debt, and you can expect your claim to be paid.