QUESTION
What are the biggest differences between chapter 7 and chapter 13 bankruptcy?
Asked on May 21st, 2014 on Bankruptcy - New York
More details to this question:
I am trying to figure out the difference between the two to help me decide the best route for me.
15 ANSWERS
Bankruptcy Attorney serving Myrtle Beach, SC
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Law Office of Margaret L. Evans, PC
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In Ch. 7, you are simply liquidating your Schedule F unsecured, non-priority debt and paying nothing towards them. If you obtain a discharge, you'll owe these creditors nothing. HOWEVER, since the bankruptcy act was overhauled in 2005, you must now qualify to file a Ch. 7 under the MEANS TEST with no presumption of abuse arising. In a Ch. 13, you actually pay ALL of your creditors SOMETHING in a plan that must be confirmed by the court. You must have enough DMI (disposable monthly income) to support a confirmable plan. How much you must pay monthly will depend on your income and your debts. You also have many more advantageous tools at your disposal with a Chapter 13, too, such as the ability to pay past due mortgage payments (even if you're in an ongoing foreclosure action), readjust car loans or other secured debts that are 910 days or older, the ability to avoid a judgment lien, pay back taxes through the plan, etc. Question Detail: I am trying to figure out the difference between the two to help me decide the best route for me. - only a consultation with a consumer bankruptcy attorney can help you determine what route is best for you. However, if you're trying to stop a foreclosure sale, repossession of a car, stop an action for back child support or alimony, lowering of secured debt over 910 days old, etc., then Ch. 13 MAY be your best option.
Answered on May 28th, 2014 at 2:18 PM
Bankruptcy Law Attorney serving Austin, TX
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Law Office of Susan G. Taylor
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Chapter 7 bankruptcy: 3 months, pay the value of your non-exempt property (probably nothing) to discharge all unsecured, nonpriority debt. Chapter 13 bankruptcy: pay something each month, at least the value of your non-exempt property or the amount of disposable income you have according to your budget and/or the means test, for THREE to FIVE YEARS, to discharge unsecured, nonpriority debt. There are, of course, advantages of each chapter. You need to consult an attorney.
Answered on May 27th, 2014 at 3:09 AM
William Rhymer
Basically a Chapter 7 wipes out most debts. There are some debts that cannot be wiped out.
Answered on May 27th, 2014 at 3:08 AM
A chapter 7 is usually completed in a matter of 4-5 months, attorney fees are paid prior to the filing, the person filing is responsible for future vehicle payments (if you want to keep the vehicle), and a chapter 7 trustee may be able to sell certain assets. A chapter 13 will last 3-5 years, requiring monthly payments. The payments are used to pay off any vehicle loans. Chapter 13 Trustee do not take assets. A chapter 13 has a super discharge that can wipe out debts that can not be wiped out in Chapter 7.
Answered on May 22nd, 2014 at 2:09 PM
bankruptcy Attorney serving Paul, ID
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Paul N. J. Ross Law, PLLC
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There are a large range of reasons why a person would choose a Chapter 13 over a Chapter 7 (if not forced into a 13). But each of these scenarios will be unique to each set of facts. Therefore, the biggest differences will depend heavily on the facts of your case.
Answered on May 22nd, 2014 at 5:59 AM
Chapter 7 gets rid of most debts, takes less time and usually costs less. Chapter 13 requires monthly payments to the trustee and the payments will have to be made over 3 to 5 years. But Ch. 13 protects more assets. Without more information it is impossible to tell you whether one is better for you than the other.
Answered on May 21st, 2014 at 6:16 PM
This is a question more easily answered during a free consultation to assess your financial situation and what is in your best interest. Many variables must be considered. In general, most people prefer a Chapter 7 if they can qualify because it's the quickest and least expensive. People who have relatively high income or a lot of assets are usually forced to do a Chapter 13 based on the mandatory "means test." Prior bankruptcy filings also may have an impact on the decision. The bankruptcy exemptions and most of the paperwork are the same under either chapter, but a Chapter 13 requires a longer term commitment, typically at least 3 years, while a Chapter 7 can be filed and discharged within about 3 months. Your assets, your income, your household size and many other factors all go into the decision. Many attorneys, such as myself, offer a free consultation to help you make the best possible decision whether or not you decide to hire them.
Answered on May 21st, 2014 at 3:09 PM
There are several major differences between Chpt. 7 and Chpt. 13. Chpt. 7 bankruptcies are designed for people who cannot afford to pay anything to their unsecured creditors (credit cards, medical bills, past due rent or utilities, etc.). If you can afford to pay your creditors anything, after paying your normal, reasonable monthly living expenses, then you cannot do a Chpt. 7. Another big consideration with Chpt. 7: If you have any assets that are worth more than you can exempt under your available state or federal exemptions, the Chpt. 7 Trustee will take the asset and sell it to pay creditors. In Chpt. 13, that is very unlikely to happen; however, you will need to make monthly payments to the Chpt. 13 Trustee based on several factors, including how much you can afford to pay your creditors, and whether your assets exceed your available exemptions. There are other factors that need to be taken into account, so all this is more complicated than I can write here.
Answered on May 21st, 2014 at 3:07 PM
There are a number of differences, I'd encourage you to meet with an attorney to learn how each would apply to your situation. The short answer is: a chapter 7 is a liquidation of assets and a discharge of most debts (child support and back taxes are some that can't be discharged), while a chapter 13 establishes a plan to repay some or all of your debts, while allowing you to keep more of your assets.
Answered on May 21st, 2014 at 3:05 PM
1) Can you afford to make payments on debts for 3 - 5 years? 2) Have you got debts that are not eligible to be eliminated in a Chapter 7, such as tax debts, child support, alimoney? 3) Do you need time to pay back past due debts on property in order to retain the property? 4) Do you qualify for lienstripping to remove a second mortgage?
Answered on May 21st, 2014 at 3:03 PM
Bankruptcy Chapter 7 Attorney serving Los Angeles, CA
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The Law Offices of Peter M. Lively
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In a nutshell, Chapter 13 is a reorganization with a payment plan and Chapter 7 is a liquidation without a payment plan. You should consult with a bankruptcy attorney regarding your financial circumstances so that you have guidance in evaluating your options.
Answered on May 21st, 2014 at 3:03 PM
In a Chapter 7 you receive a discharge of most debts, and the case is closed within 4 months. In a Chapter 13 you make payments for 36 to 60 months, depending on your budget. Most Chapter 13's are filed because a house is in foreclosure, or the debtor owes more then $5,000 in tax liability which is not dischargeable (this is NOT to say taxes are not dischargeable). Sometimes debtors are forced into a Chapter 13 because they are high income earners. Also, Chapter 13's provide much more flexibility on what property can be kept by the debtor (as opposed to a Chapter 7 Trustee taking the property and selling it for the benefit of the creditors). There are other significant differences. Suffice it to say, get with an experienced bankruptcy attorney for a consultation.
Answered on May 21st, 2014 at 11:36 AM
Bankruptcy Law Attorney serving Livingston, NJ
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Law Office of Stuart M. Nachbar, P.C.
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Simply put, do you have anything, such as equity in a house to protect or are you in arrears on a mortgage. Chapter 13 allows you to clean up arrears, Chapter 7 does not.
Answered on May 21st, 2014 at 11:26 AM
Home ownership is often the biggest factor. If you are behind on your mortgage and want to keep your home 13 allows you to spread your back debt over time. Assets, total debt and income are the other factors . Bankruptcy is not a DIY friendly field of law, consult an experienced attorney.
Answered on May 21st, 2014 at 11:21 AM
One is total liquidation and the other is a repayment plan for payments that you need time to catch up on.
Answered on May 21st, 2014 at 11:18 AM