Which Bankruptcy – Chapter 7 or Chapter 13

by Robert Brawley Chapter 7 bankruptcy

There are two main types (there are others) of consumer bankruptcy, namely that of Chapter 7 and Chapter 13. So, what are the differences, and which is likely to be the better option for you?

 

An Overview

 

Chapter 7

This, the Chapter 7 bankruptcy, is the most common type. It is available to private persons and to businesses, and is known as straight bankruptcy.

In Chapter 7, nonexempt assets, which are assets that can be sold to then pay off debts, are given to a trustee who sells the assets and pays off creditors with the proceeds.

Once a Chapter 7 is filed, creditors may not collect funds directly from the bankrupt party. After the assets have been sold and the creditors paid, the remainder of the debts are cancelled and the bankrupt party no longer holds any responsibility for those debts.

The following debts are not dischargeable under Chapter 7:

-          Restitution, criminal fines, and drunk driving judgements.

-          Child support and alimony.

-          Debts that have been incurred through intentional wrongdoing (fraud).

-          Student loans and back taxes that are less than three years old.

-          Any recent purchases of a substantial amount.

-          Contracts that involve liens or titles such as automobiles or land.

 

Chapter 13

With respect to Chapter 13 bankruptcy, the debt is reorganized into a debt repayment schedule over a period of between three and five years. Anything between 10 and 100 percent of what is owed must be paid, depending on the party’s income, the nature of the debt, and how much is owed.

The following debts are non-dischargeable under Chapter 13:

-          Student loans.

-          Child support and alimony.

-          Criminal fines and drunk driving judgements.

 

Reasons to Opt for Chapter 7

If the following reasons are applicable, a Chapter 7 bankruptcy could make the best alternative:

-          There are debts that have no co-signers.

-          There is no hope of repaying the debts.

-          The creditors are about to sue.

-          Exempt property and income will be protected.

-          There is no qualification for Chapter 13.

 

Reasons to Opt for Chapter 13

-          In the past six years, Chapter 7 has already been filed for.

-          There are debts with co-signers.

-          The debts can be successfully paid within three to five years.

-          Chapter 7 is not an option because of your income.

-          The desire is to leave open an option for Chapter 7 at a later date.

-          If you opt for Chapter 7, your assets will be liquidated.

 

For more about different types of bankruptcy and if it’s a good alternative for you, get in touch with Statman, Harris & Eyrich, LLC.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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