What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Bankruptcy Lawyer

Deciding to file for bankruptcy as an individual is a big decision and one that you have no doubt made after many long hours of consideration and probably at least a few sleepless nights. Now that you have made the decision, you are probably still wrestling with logistics. How do you file for bankruptcy? What types of bankruptcy are available to you? How do you know which type of bankruptcy is the right choice?

The best way to get answers to these questions will require consulting with an experienced bankruptcy attorney who can analyze your personal financial situation and help you choose your  best option. In the meantime, however, consider these basic facts about the most common types of bankruptcies filed by individuals: Chapter 7 and Chapter 13 bankruptcy

Chapter 7 Bankruptcy

  • Before filing for Chapter 7 bankruptcy, you will likely have to talk with a credit counselor
  • You will have to turn over a record of all of your finances and property to the bankruptcy court for review.
  • The bankruptcy court may not allow you to file for Chapter 7 bankruptcy if it determines that you have the income or other means to pay back a portion of your debt.
  • If you successfully file for Chapter 7 bankruptcy, the court will appoint a trustee to sell your assets to pay back the debt you owe.
  • Not all of your assets will be sold, but you may lose your house or other personal property.
  • The Chapter 7 bankruptcy proceeding is straightforward and will most likely be over in a few months to one year.
  • At the end of Chapter 7 bankruptcy, most if not all of your debts will be forgiven and you can start fresh.

Chapter 13 Bankruptcy

  • Like Chapter 7 bankruptcy, you will most likely also be required to consult with a credit counselor before filing for Chapter 13 bankruptcy.
  • LIke Chapter 7 bankruptcy, in Chapter 13 bankruptcy, you will also have to turn over your finances to the court.
  • Unlike Chapter 7 bankruptcy, the court will not deny your filing if your income is too high in a Chapter 13 bankruptcy filing. In fact, if you are denied a Chapter 7 bankruptcy, you can most likely still proceed for debt relief by filing for Chapter 13 bankruptcy.
  • After filing for Chapter 13 bankruptcy, the court will appoint a trustee, just like Chapter 7. But, instead of being in charge of selling your assets to repay your debt like the Chapter 7 trustee, a Chapter 13 trustee is in charge of helping you create a repayment plan to get rid of your debt over time by paying it off.
  • Though it depends on the terms of your repayment plan, you will probably be able to hold on to personal property like your home in a Chapter 13 bankruptcy.
  • The Chapter 13 bankruptcy proceeding is more complicated than a Chapter 7 bankruptcy, and will last the length of time of your repayment plan, which can be several years long.
  • Like with a Chapter 7, at the conclusion of a Chapter 13 proceeding, most if not all of your debt will be forgiven.

It can be difficult to figure out which type of bankruptcy for which you qualify and which will be best for you. Consider the bullet points above, and contact a qualified bankruptcy attorney in your area today to get started.  

Source: Bankruptcy Lawyer Clearwater, FL, Law Office of Michael A. Ziegler, P.L.

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