Filing for bankruptcy? Know traits of Chapter 7 and Chapter 13

| Mar 2, 2018 | chapter 7 |

When it comes to personal bankruptcy, there are two chapters that almost all people will utilize: Chapter 7 and Chapter 13. The differences between these types of bankruptcies are important. When you consider that nearly three-quarters of filings are Chapter 7, and the other quarter of filings are Chapter 13, you can probably guess that income is a big factor in determining which bankruptcy you file.

Chapter 7 has an income ceiling, meaning that anyone that makes less than that can qualify for Chapter 7. Anyone over that ceiling will likely utilize a Chapter 13 filing. But what else differentiates these forms of bankruptcy? Let’s look at a few points:

  • The main “mechanism” of each bankruptcy is different. Chapter 7 will use debt discharge and asset liquidation to pay back your creditors and clear your debts. Chapter 13, meanwhile, will utilize a repayment plan to get your debt under control and to pay back your creditors.
  • Major assets will likely be lost during Chapter 7, such as a car you have a loan on or a mortgage. But under Chapter 13, these assets are very likely to be protected.
  • You cant refile for Chapter 7 if you already filed for Chapter 7 — though you can if your prior bankruptcy was a Chapter 13. If you filed for Chapter 13 before, you can refile for Chapter 13.
  • There will be unique circumstances with every bankruptcy case, so regardless of Chapter 7 or Chapter 13, you should consult with an attorney.

Source: FindLaw, “Chapter 7 vs. Chapter 13 Bankruptcy,” Accessed March 2, 2018