Understanding the Comparison of Chapters 7 and 13 Bankruptcy


Understanding the comparison between Chapters 7 and 13 Bankruptcy is essential in filing for bankruptcy. Both Chapters offer different advantages and disadvantages depending on the individual’s financial situation. That is why it is highly recommended to review each of them to figure out the best course of action you may take.

This article will discuss the differences between the two bankruptcy chapters, Chapters 7 and 13. You will also learn how a bankruptcy attorney can help an individual in debt.

Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is a liquidation bankruptcy, letting individuals discharge their eligible unsecured debts. This means the individual can wipe away their debt and start fresh with a clean slate. However, this type of bankruptcy offers no debt restructuring or payment plans. It is important to note that some debts, such as student loans or taxes, cannot be discharged in a Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 Bankruptcy is a reorganization bankruptcy that allows individuals to restructure their debts and create a payment plan to repay their creditors over three to five years. This type of bankruptcy is ideal for individuals behind on their mortgage payments or needing to catch up on their taxes. It is important to note that the individual must have a steady source of income to qualify for a Chapter 13 bankruptcy.

Naming the Major Differences Between Chapter 7 and Chapter 13 Bankruptcy

  • Eligibility Requirements

To be eligible for Chapter 7 bankruptcy, you must complete and pass a means test to prove that you do not have enough disposable income to pay off your debt. To be under Chapter 13 bankruptcy, you must have a regular source of income, be current on your tax filings, and not have had a bankruptcy discharged in the last four years.

  • Process

The process for filing Chapter 7 bankruptcy is relatively quick (usually taking 3-4 months). Chapter 13 bankruptcy, on the other hand, takes much longer (3-5 years).

  • Debt Repayment

With Chapter 7 bankruptcy, you are not required to repay any debt. However, with Chapter 13 bankruptcy, you must create and follow a repayment plan to repay a portion of your debt.

  • Property

With Chapter 7, you can keep some of your property, depending on the state laws and the property’s value. With Chapter 13, you can still control your property if you make your required payments.

  • Creditors

With Chapter 7, creditors cannot contact you and must cease all collection efforts. With Chapter 13, creditors may still contact you, but they must follow specific guidelines.

  • Credit Score

Chapter 7 will harm your credit score, while Chapter 13 may have a more positive effect.

  • Discharge

With Chapter 7, you can get a discharge of your debt. On the other hand, with Chapter 13, you may not be able to get a discharge, but you may be able to reduce your debt and lower your payments.

Call a Bankruptcy Attorney Today

Understanding the distinctions between Chapter 7 and Chapter 13 bankruptcy is essential if you consider filing for bankruptcy. If you are considering bankruptcy, you should speak with a qualified bankruptcy attorney who can facilitate the process and determine which chapter is right for you.

Angela R. Owens is an experienced bankruptcy attorney in Dallas, Plano, Allen, Frisco, and the surrounding area. Our team is committed to providing our clients with exceptional legal services, personalized attention, and creative solutions to their debt-related problems. Our expertise, knowledge, and dedication to our clients make us an excellent choice for debt defense law services.

Angela R. Owens

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