One of the most common questions that gets asked about the topic of bankruptcy in general is: what is the difference between a Chapter 7 bankruptcy filing and a Chapter 13 bankruptcy filing? These are the two most common forms of personal bankruptcy, with nearly three-quarters of bankruptcy cases are Chapter 7 and the remainder are Chapter 13.
The major difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy is that Chapter 7 is simpler and has a lower income requirement than Chapter 13. Chapter 13, on the other hand, has a higher income threshold to qualify but also offers the filer a repayment plan that can give them time to recover their financial footing.
Chapter 7 heavily utilizes the debt discharge process to clear out old debts and help the bankrupt individual get out from under their mountain of debt. This means that cars and homes that you own will be repossessed or seized to pay off your creditors. However, Chapter 13 often protects these assets, giving the bankrupt individual the chance to pay back what he or she owes over time.
These are just a few differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy. There are many other intricacies that differentiate these two forms of bankruptcy. As such, it is important for those who are considering bankruptcy to discuss their case with an experienced attorney in the area of bankruptcy law. This stage of your life is too important to leave to chance.
Source: FindLaw, “Chapter 7 vs. Chapter 13 Bankruptcy,” Accessed July 20, 2017