What Is The difference Between Chapter 7 Bankruptcy And Chapter 13 Bankruptcy?

The most thought of chapter of bankruptcy that most will think about when people contemplate bankruptcy is Chapter 7 bankruptcy. Usually, when a person decides filing bankruptcy is in their future they want to file Chapter 7. Rarely does a person walk into a bankruptcy attorney and ask to file Chapter 13 bankruptcy. Chapter 13 is a lesser-known chapter but still has a large amount of benefits depending on the debtor’s situation.

The most popular bankruptcy filing is Chapter 7. A Chapter 7 bankruptcy shows its power in discharging unsecured debts. Unsecured debts can be categorized as credit cards, medical bills, payday loans and personal loans. It’s anything that is not secured by a piece of property. When a person decides to file Chapter 7 bankruptcy, the automatic stay will be put in place stopping all creditors from collecting on any of the debts. The automatic stay also will stop foreclosure, lawsuits, judgments and wage garnishments. This is why so many people in financial trouble want to file Chapter 7 bankruptcy. At the end of the whole process, the debtor will get a bankruptcy discharge wiping out all their unsecured debts. If the individual filing bankruptcy doesn’t have any secured bills like a car loan or a mortgage, they might exit a Chapter 7 being virtually debt-free.

A Chapter 13 bankruptcy on the other hand is best used for individuals that are trying to protect property. This is where a Chapter 13 really shines. When a person files Chapter 13 bankruptcy they will be required, along with their bankruptcy attorney, to come up with a feasible repayment plan that will be paid over 3 to 5 year time frame. Chapter 13 bankruptcy is typically used for a person that makes a decent income and can’t afford to pay back a portion of their debt. Since the debts are paid by priority, there is a chance that the debtor will only be required to pay back a small portion of their unsecured debts with the remainder being discharged at the end of the bankruptcy filing. Where a Chapter 13 bankruptcy really shows its power is in allowing the debtor to be able to negotiate with their mortgage lender to get caught up on back payments while being able to keep the property. Both chapters of bankruptcy should be done with the help of a bankruptcy attorney. Since the changes to the bankruptcy code back in 2005, filing bankruptcy has taken on a new complexity that should be done with professional help.

2 Responses to What Is The difference Between Chapter 7 Bankruptcy And Chapter 13 Bankruptcy?

  1. says:

    In the USA, creidt reporting agencies are allowed to report bankruptcies for 10 years. Other negatives (late payments, etc.) may not be reported after 7 years have passed.

  2. says:

    I deghlit in, cause I found just what I used to be looking for. You have ended my 4 day long hunt! God Bless you man. Have a nice day. Bye


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