Differences Between Chapter 7 and Chapter 13

by DeLadurantey Law Office, LLC on January 14, 2015

BankruptcyIf you are considering filing a personal bankruptcy, you are probably trying to understand the differences between a Chapter 7 or Chapter 13. Both types of filings have their own pros and cons, so it is important to confer with a knowledgeable bankruptcy attorney to understand what type of filing is available and most beneficial to you.

All individuals seeking bankruptcy protection are required to take a credit counseling course. This class can be the first step in helping you determine if it is beneficial for you to file a case. We can review your individual finances and determine the best debt relief strategy for getting financial stability back in your life, but below are a few considerations:

Length of case

One of the important benefits of both Chapter 7 and Chapter 13 cases is that they are comprehensive means for dealing with all of your creditors. All of your creditors and all of your debt must be included in your filing, so when you complete your case, you truly have a “fresh start.” A Chapter 7 filing usually lasts three to six months and a Chapter 13 lasts three to five years to complete (depending on your repayment plan). These are short time commitments when compared to the benefit you obtain from eliminating your debt.

Requirements for filing

To qualify for a Chapter 7, you must pass the “means test.” The means test is a formula applied to individuals who have a median income that exceeds the applicable state’s median income. The law provides a variety of expenses that a debtor can deduct from his or her income, so the best plan is to confer with us to learn how the means test will apply to your unique situation. To learn more about the means test, please read our blog titled Chapter 7 Means Test Explained.”

To qualify for a Chapter 13 filing, you must have a sufficient source of income to propose a feasible repayment plan. Only individuals are allowed to seek debt relief under Chapter 13; however, if you are a business owner, you can include personal debts associated with your business in your filing. There are also certain limits on the amount of debt you can have, so again, it is essential that you confer with us to determine if a Chapter 13 will benefit you.

Impact on credit score

Whenever you file a bankruptcy, it will negatively impact your credit score. For most people, their credit score has already been damaged by past due payments, late payments, lawsuits or asset seizures. As a result, the effect of the bankruptcy filing is not significant. A Chapter 7 notation will remain on your credit report for 10 years, while a Chapter 13 filing remains on your credit report for seven to ten years.

If you are planning to file a bankruptcy case or you want to learn more about the debt relief options available to you, contact us to schedule an appointment today.

Contact The Milwaukee Bankruptcy Attorneys, DeLadurantey Law Office, LLC.   DeLadurantey Law Office focuses on student loan debt, Chapter 7 and 13 bankruptcy, debtors rights, debt negotiations, debt relief, mortgage loan modifications, and foreclosure defense. A defender of the little guy, DeLadurantey Law Office serves the following location – Milwaukee, South Milwaukee, West Milwaukee, Waukesha City, Waukesha Town, Kenosha, Racine, and all other municipalities in Milwaukee County, Waukesha County, Kenosha County, and Racine County. We can be contacted by phone: (414) 377-0518 and can be found on the Internet and on Facebook.


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