The differences between Chapter 7 & Chapter 13 bankruptcy

by DeLadurantey Law Office, LLC on September 23, 2013

Chapter 7 and Chapter 13The two main types of personal bankruptcy cases are Chapter 7 and Chapter 13. Many consumers are confused about which type of filing they should pursue. The answer depends on your individual financial circumstances. Below is general guidance on how Chapter 7 of Chapter 13 could benefit you:

Chapter 7

To qualify for a Chapter 7, you must pass the means test. This “test” is actually a mathematical formula used by the court to confirm individuals are not abusing the bankruptcy system by filing for relief when they can afford to pay their debt. The means test will be discussed further in future blogs. A Chapter 7 debtor must also attend a credit counseling class.

The most important benefit of filing a Chapter 7 case is that you get a discharge (cancellation) of almost all of your unsecured debt.  A Chapter 7 is the quickest means for comprehensively dealing with your debt. Most cases last 3 to 5 months. Generally speaking, if you have few non-exempt assets and little extra income after paying your for your basic living expenses, a Chapter 7 filing could save you thousands (even hundreds of thousands) of dollars!

Chapter 13

Chapter 13 cases provide a means for you to reorganize and readjust your debt. To file a Chapter 13, your debts must be below a certain level and you must have a regular source of income. Chapter 13 is beneficial to debtors who have a significant asset, like a home, that they want to keep. You must complete a credit counseling course and propose a feasible plan of repayment to your creditors.

A Chapter 13 case lasts three to five years, depending on your repayment plan.  You will make your payments to the trustee, who will distribute the money to the creditors according to the plan’s schedule. Other benefits of a Chapter 13 include lien stripping, getting caught-up on delinquent mortgage payments and many others that will be discussed in future blogs.

Choosing to file a bankruptcy case can be a difficult decision.  You should consult with a knowledgeable bankruptcy attorney at DeLadurantey Law Office, LLC, to assist you in deciding whether a Chapter 7 or Chapter 13 case is best for you.

If you are considering filing for bankruptcy protection, call DeLadurantey Law Office, LLC, at (414) 377-0518. We believe that each client should receive the individual attention necessary to reach their financial goals. Recognizing the needs of working clients, we maintain a flexible schedule and offer evening appointments. Initial consultations are always free, and phones inquiries are always welcomed.

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