What is the difference between Chapter 7 & Chapter 13 Bankruptcy?

Should I file for Bankruptcy?

The majority of Bankruptcies in the United States are either Chapter 7 or Chapter 13 Bankruptcies, however, most people don't realize there are options or that multiple Bankruptcy options even exist. This is why it is essential to always consult with a Bankruptcy Attorney when considering debt relief. Our team at The Law Offices of Kenneth Borcia have put together this blog post to shed some light on the difference between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.

CHAPTER 7 BANKRUPTCY

Chapter 7 Bankruptcy is a liquidation designed to wipe out your unsecured debts, such as, credit cards and medical bills. When filing for Chapter 7 Bankruptcy you are appointed a trustee to administer your case. This trustee is tasked with reviewing the overall bankruptcy documents to ensure that the filing is legitimate and eligible. Additionally, in efforts to repay your creditor's (either in full or partial), the trustee will liquidate any non-exempt assets you might have, it is important to note that if you have no non-exempt assets, the creditor's will receive nothing from you and the debt will be wiped out. It is because of this that Chapter 7 Bankruptcy is ideal for individuals looking to get rid of their unsecured debt with little or no income and have no assets.

CHAPTER 13 BANKRUPCTY

Chapter 13 Bankruptcy is also known as the "Reorganization Bankruptcy" in that it reorganizes the debt of the debtor so that he or she may make affordable payments to catch back up on their past-due bills. Chapter 13 Bankruptcy is often the preferred method for those that have a steady income and do not wish to liquidate their assets. In fact, with Chapter 13 Bankruptcy the debtor does not have to liquidate any assets, including nonexempt assets. All the while, Chapter 13 allows for debt consolidation into a simple and affordable repayment plan to help catch up on missed mortgage payments and even wipe away junior liens on your home. Chapter 13 Bankruptcy is for those who can afford making payments to get caught back up on car payments, alimony, child support and missed mortgage payments.

• BENEFITS:
  
• Chapter 13 - Allows debtor to keep property and repay debts.
• Chapter 7 - Quickly dissolve most debt & move on.
• DRAWBACKS:
  
• Chapter 13 - Monthly payment required.
• Chapter 7 - Property is liquidated & there is no way to avoid foreclosures/repossessions.
  
• TIME NEEDED FOR DISCHARGE:
  
• Chapter 13 - 3-5 years (time taken to complete repayment plan).
• Chapter 7 -  3-5 months.
  
• TYPE OF BANKRUPTCY:
  
• Chapter 13 - Reorganization.
• Chapter 7 - Liquidation.
  
• WHO CAN FILE?:
  
• Chapter 13 - Individuals only (including sole proprietors).
• Chapter 7 - Individuals & Businesses.
  
• ELIGIBILITY:
  
  • Chapter 13 - Cannot have more than $394,725 of unsecured debt or $1,184,200 of secured debt.
  • Chapter 7 -  Disposable income must be low enough to pass the Chapter 7 means test.
    

NEED ADVICE?

Kenneth Borcia has over 30 years experience helping clients throughout Lake County, North Chicago, Waukegan, Round Lake, Zion and Antioch, IL experience financial freedom through debt relief and consolidation, our team of experts are here to help you any time and are always looking to earn your business. Feel free to call us today at 847-680-1110 or send an email to support@borcia.com. We hope you found this article useful and look forward to hearing from you soon.