These two chapters of the bankruptcy code are very different. It is important to understand the key features of each before you decide which one is best for your particular situation.
Chapter 7 is known as a “liquidation” bankruptcy, meaning that certain assets may be sold to pay off creditors. However, many states have laws that protect certain property types, such as a person’s home or car, up to a certain value. These laws are called “exemptions.”
Exemptions vary from state to state, but they typically cover items such as:
- Tools of the trade
- Certain types of retirement accounts
Chapter 7 is typically best for people with low income, few assets, and high levels of unsecured debt, such as credit card debt or medical bills. It is important to note that certain types of debts, such as child support or alimony, cannot be discharged in Chapter 7 bankruptcy.
Chapter 13 is known as a “reorganization” bankruptcy. It allows debtors to keep their property and repay creditors over time, typically three to five years.
Like Chapter 7, certain debts cannot be discharged in Chapter 13 bankruptcy, such as child support or alimony.
Chapter 13 is typically best for people who have a regular income and want to keep their property but struggle to repay their debts. It can also be a good option for people who have fallen behind on their mortgage or car payments and are at risk of foreclosure or repossession.
So, in chapter 7 vs chapter 13? It depends on your particular situation. If you have a low income and few assets, Chapter 7 may be better. If you have a regular income and want to keep your property but struggle to repay your debts, Chapter 13 may be the better option.
Ultimately, it is important to speak with a bankruptcy attorney to discuss your situation and determine which chapter is best for you. You need to understand the key features of each chapter before making a decision.
Benefits of the two chapters
- a) Chapter 7:
- You may be able to eliminate certain types of debt
These debts may include credit card debt, medical bills, and personal loans.
- The process is typically shorter than Chapter 13
Chapter 7 bankruptcy can last as little as three or four months, whereas Chapter 13 can last for three to five years.
- You may be able to keep certain types of property
Depending on your state’s exemption laws, it may include your home and car.
- b) Chapter 13:
- You may be able to repay your debts over time
Chapter 13 allows you to repay your debts over a three- to five-year period.
- You may be able to keep your property
If you are at risk of foreclosure or repossession, Chapter 13 may allow you to keep your property.
- The process is typically shorter than Chapter 7
While Chapter 7 can last as little as three or four months, Chapter 13 bankruptcy typically lasts for three to five years.
In a nutshell, these two chapters have different pros and cons, and it is important to understand the key features of each before making a decision. Ultimately, the best choice for you depends on your particular financial situation. If you are unsure which chapter is best for you, it is important to speak with a bankruptcy attorney to discuss your options.