Which Is Right For You: Chapter 7 Or Chapter 13?


When you know that you are about to make a major financial move, you may be wondering what the differences are in the two main types of consumer bankruptcy. Most people are more familiar with chapter 7, but chapter 13 has several advantages over 7. To help spare the confusion, read on for a quick and easy guide to each type to help you make the decision.

Chapter 7

There is no substitute for the way a chapter 7 bankruptcy literally wipes out the majority of most people's debt. This form is what most people mean when they refer to bankruptcy, and if you have a lot of credit card debt (as a lot of people do) it can give you the most value for your filing. It can eliminate all unsecured debt, which covers credit cards and personal loans, and has the power to stop all debt collection activities immediately upon filing.

Chapter 7 might be for you if:

1. You have a median income. Check the charts to see what the median income is in your state, because if you exceed it you may have a problem filing a chapter 7. There are some deductions to your income available, so if you exceed it just a bit you may still be able to file.

2. You have little property. If you have an expensive home that is mostly paid off, you might stand to lose that home. The bankruptcy courts have the power to seize your property to help pay some of your creditors. You can use a homestead exemption to reduce the value of your property in most cases, but not always.

3. You want to be completely done with your bankruptcy in a few months. In most cases, a chapter 7 can be over with in a matter off months, depending the court backlog in your federal district.

Chapter 13

This type of bankruptcy involves renegotiating your debt and spreading out the payments to make it less of burden. You will still be responsible for paying the debt, but in a reduced or extended manner. Chapter 13 is for people who:

1. Have too much income to file a chapter7. There are no income limits on a chapter 13 filing like there are on chapter 7.

2. Want to keep valuable property that could serve as an income generator. For example, a rental property that might be sacrificed in a chapter 7 could be kept in a chapter 13.

3. Aren't concerned with the time it takes for the bankruptcy to be complete. It can take years for your chapter 13 to be final.

Speak to your bankruptcy attorney for more information about both of these types of bankruptcy.


1 March 2018

Talking About Bankruptcy Proceedings

Hello, my name is Neil Gamford. Welcome to my site about bankruptcy proceedings. After my divorce, I was left near penniless and without a place to stay. I was paying all of my income to alimony and my remaining debts. Although I had a solid payment plan in place, it was getting difficult to cover my financial obligations without a home. Luckily, I met with a bankruptcy attorney, who helped me find a way to discharge my debts and start over. I hope to share the information I learned throughout that process with you through this site. Please feel free to visit anytime.