What’s The Difference Between Chapter 7 And 13?

Chapter 7 and Chapter 13 bankruptcies have some similar features. They both provide protection for debtors who are in difficult debt situations. They both impose an automatic stay, preventing creditors from seeking to collect. Beyond that, however, the two kinds of personal bankruptcy are for very different situations.

Chapter 7: Hitting The Reset Button

Chapter 7, also called straight bankruptcy or liquidation bankruptcy, is the most common form of bankruptcy. It is for people who are simply not earning significant income. Filing automatically puts a halt to repossession, harassment and garnishment. A trustee is named to liquidate your assets. That sounds terrible, but most of your important assets are exempt from liquidation. Many who file for Chapter 7 lose nothing or next to nothing in this phase. Meanwhile, the trustee discharges all of your debts that are not secured by collateral. Your credit card and medical debts disappear.

Not everyone qualifies for Chapter 7. You must pass a means test, meaning you can only have so much wealth. People are scared away by the means test, but they shouldn’t be.

Chapter 13: Stretching Out The Payment Schedule

Chapter 13, also called reorganization bankruptcy, is for people who have regular income, but need to stretch out their debt payments over three to five years. Under Chapter 13, you can expect to repay from 10 percent to 100 percent of all your debts, based on your income, the nature of your debt and how much you owe.

Chapter 13 can stop foreclosure on your home, renegotiating your mortgage payments.

People don’t realize that Chapter 13 is often less expensive to do than Chapter 7. For one thing, firms like McBride Law Firm offer no-money-down Chapter 13s. Legal fees and costs may be paid on time, as part of the new schedule of debt payments.

Knowing The Difference Between Chapter 7 And Chapter 13

There are many reasons to choose one approach over the other, and our attorneys would be happy to go over these details in a free, no-obligation discussion at our Alexandria, Louisiana, offices. Or call our call tracking number. Our lawyers will tell you the difference between Chapter 7 and Chapter 13, and anything else you need to know.