Most bankruptcy cases in the United States are filed under Chapter 7 or Chapter 13. You can find relief from all your debts in both bankruptcy chapters. But what makes bankruptcy 7 different from bankruptcy 13?
When you declare chapter 7 bankruptcy, you should be ready to lose some assets because chapter 7 law involves selling your non-exempt assets to pay your unsecured debts. That explains why Chapter seven bankruptcy is also referred as the “liquidation bankruptcy.”
On the other hand, Chapter 13 bankruptcy is the “reorganization” type of bankruptcy or also called as “wage-earners’ bankruptcy.” Chapter 13 primarily applies to debtors who have a regular income. They pay their debts through a repayment plan.
Chapter 7 bankruptcy
Chapter 7 protection is a common choice for most debtors because it discharges most of their debts. You may lose some of your valuable properties when you file for Chapter 7, yet it also carries many benefits such as:
1. Once you file your bankruptcy petition, the court will issue an automatic stay saving you from harassing creditors’ phone calls and that stopping them from filing any lawsuit against you. This benefit is applicable for both Chapter 7 and Chapter 13 bankruptcy.
2. In Chapter 7, the court evaluates your income six months before you file for bankruptcy and any income made after this action is not included in the bankruptcy estate. Which means, that income is safe from your creditors.
3. A calculation of your income and expenses is done to determine if you have enough money left to pay unsecured debts. If there’s none, then you best qualify to file for Chapter 7 bankruptcy.
4. Chapter 7 bankruptcy rules does not need you to appear before the court in most cases. Therefore, less encounter with the bankruptcy judge. Yet you are obliged to attend the creditor’s meeting with the bankruptcy trustee and your creditors–although they are not compelled to do so.
5. Moreover, one major reason most debtors choose Chapter 7 is because you can receive a discharge in just 60 to 90 days after the creditors’ meeting. Then finally, you can start afresh with all our debts wiped out. Yes it’s true that Chapter 7 bankruptcy remains in your credit report for up to ten years, but you can use such time duration to repair and improve your credit rating.
Chapter 13 bankruptcy
In Chapter 13, a debtor should develop a repayment plan to pay a portion of his/her debts. If you have a regular income, then you certainly qualify to file for Chapter 13.
1. Chapter 13 bankruptcy allows you to catch up on delayed mortgage payments and bills preventing foreclosure of properties and repossession of vehicles.
2. Unlike in Chapter 7 where you are required to sell your non-exempt assets, you get to keep all of them in Chapter 13. In exchange, you have to make monthly payments for three to five years.
3. Chapter 13 bankruptcy only remains on your credit report for up to seven years unlike in Chapter 7 which is 10 years.
4. Moreover, you can just receive a discharge after you fulfill and finished what is stated in the repayment plan.
Not sure yet what bankruptcy Chapter suits best your financial disposition? You should consult a bankruptcy attorney to help you determine properly what option you can benefit more.
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Read More Contents:
Chapter 7 Bankruptcy Definition
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