Chapter 7 & Chapter 13 Bankruptcy

Filing for bankruptcy can help consumers regain financial control over their lives, helping them protect their family and vital assets such as a primary residence and automobiles. Bad things can happen to good people, and it is common for problems to arise in life that create financial stress from factors out your control. In fact, according to from September 2013 to September 2014 there were 1,107,699 bankruptcy cases filed. There are two types of bankruptcy available to consumers, Chapter 7 and Chapter 13.

A Chapter 7 bankruptcy allows a consumer to keep certain assets, most often referred to as exempt assets, and liquidates all other assets as payment to creditors. However, there is no further payment required from the consumer and any debt not paid from the sale of assets is “written off” or eliminated.

A Chapter 13 bankruptcy is a court supervised financial restructuring. This type of bankruptcy will include a payment plan that will last for three to five years.  This allows the consumer to keep assets and only pay a portion of the debt owed to creditors.

Both types of bankruptcy have qualifications and other important details that will determine what type of bankruptcy a consumer can claim, as well as what is required throughout the process. It is important to discuss your situation with an attorney who can give you legal advice based on the exact details of your situation. It is very important the bankruptcy process be handled properly.

Chapter 13 bankruptcy Advantages and Disadvantages

The primary advantage of a Chapter 13 bankruptcy is allowing you to keep most of your assets. Other advantages include creating a manageable payment plan and after the payment plan period any debt not paid is charged off. The disadvantage of a Chapter 13 is it has many requirements such as income level, various classifications of assets and can be very strict that payment plan schedules are followed.

Chapter 7 bankruptcy Advantages and Disadvantages

The advantage of a Chapter 7 bankruptcy is it wipes out your debts without locking you into a long-term payment plan. The disadvantage of the Chapter 7 is you will be starting over with a minimal level of assets and only certain debts qualify for Chapter 7 filings.

Which Chapter of Personal Bankruptcy is Right for Me?

Determining which chapter of bankruptcy is right for you can be a difficult process. Each type of bankruptcy has qualifiers for income level, disposal income, asset types and a host of other details about your personal situation. Most of the time tax debts, child support and alimony payments are not eligible for inclusion in a bankruptcy. The right bankruptcy for you will be based on what type of assets you have, what your income situation looks like and what types of debt you have.

Can I Change My Bankruptcy?

There are times a Chapter 13 can be converted to a Chapter 7 bankruptcy. This is determined by the court and bankruptcy trustee, most often this happens if an individual is unable to meet the payment terms of the Chapter 13 process. If you lose your job or something significant happens with your income while you are in a Chapter 13, then you can ask the court to review the situation and make a determination.

The sources consulted for this blog were:; Filings, Terminations and Cases Pending, 2013 and 2014 (Table F); by: Baran Bulkat, Attorney; What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?