It is a serious decision to file for bankruptcy. You should consider which option is right for you before you make a decision. Before you file for bankruptcy, it is important to understand the differences between Chapter7 and chapter 13.
The chapter you choose can have a significant impact on your financial future. It is important to understand the differences between these two consumer chapters.
What are the main differences between them?
Chapter7 is often referred to liquidation bankruptcy. This refers to the sale of property to pay off debts. An individual must have a minimum income to qualify for Chapter 7 bankruptcy.
- The process of choosing Chapter 7 is basically about reorganizing your life and starting again. You may be eligible for some exemptions for your property. However, most of it will be sold to pay any unpaid debt. To get your debts paid, you will need to give your bankruptcy trustee permission for any property that is not exempt to be sold and distributed to creditors.
- Chapter13, on the other hand, is more concerned with readjusting or restructuring debts and payment arrangements than it is about paying off personal property. To pay off all or part of your debts within a specified time frame, you will need to file a repayment plan.
The amount of debt you have to pay off will vary depending on several factors.
Your income and salary
The amount of secured or unsecured debts involvedFiling for bankruptcy is a serious step. Before you make the decision, you should know what option is best for you. By understanding the differences between Chapter 7 and Chapter 13, you can make an informed choice before filing for bankruptcy.
Not only does the chapter you select influence your immediate financial situation, but it can also effect you in the future. For this reason, it is helpful to know how the two main consumer chapters differ.
What are the main differences?
- Chapter 7 is frequently referred to as liquidation bankruptcy, as property will be sold to cover debts. To qualify for Chapter 7 bankruptcy, an individual must be below a certain level of income. Choosing Chapter 7 is basically like scrapping everything and starting over. While you may be able to qualify for certain exemptions for your property, a good portion of it will be liquidated in order to pay off any undischarged debt. In order to have your debts paid off, you must essentially give your bankruptcy trustee permission to sell any non-exempt property and distribute the proceeds to creditors.
- In contrast, Chapter 13 is much more focused on readjusting or reorganizing debts and payment plans, rather than paying them off with personal property. You will file a repayment plan in order to pay off either all or a portion of your debts over a designated time period.
How much debt you must pay off will depend on a few factors, such as:
Your income or salary
The amount of secured and unsecured debts involved
How much property or assets you own
You won’t have to liquidate any property in this type of bankruptcy plan, which means individuals can often avoid foreclosure and keep their homes when filing Chapter 13.
Summarized from an article by Kostopoulos Bankruptcy Law.
