Chapter 7 vs. Chapter 13

We are a debt relief agency. We help people file for relief under the Bankruptcy Code. The two most common paths for obtaining debt relief through bankruptcy means is to claim Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 vs Chapter 13

Chapter 7 Bankruptcy

Chapter 7 is a federal bankruptcy law enacted by the U.S. Congress to provide single and married individuals (including some owners of sole proprietorships) who experience financial difficulty a way to start over. Filing for Chapter 7 protection allows individual debtors to discharge (not pay) most unsecured debts, debts for which there is no collateral. Unsecured debts include many but not all purchases made on credit cards. Filing under Chapter 7 normally allows you to keep your assets and then start over.

What Does Filing Chapter 7 Discharge?

Chapter 7 generally does not discharge student loans, certain IRS debts, support obligations, or debts arising from fraud, the infliction of a willful malicious injury or restitution. If you decide to file Chapter 7, the attorney will work with you to create schedules outlining your creditors, assets, income and expenses. These schedules are signed by you and filed with the court along with a voluntary petition for bankruptcy. Once these documents are filed, creditors are automatically legally prohibited from suing, calling or engaging in other collection actions against you.

It generally takes approximately four months before the Bankruptcy Judge signs the discharge order and you are relieved of all dischargeable debt. By filing for Chapter 7, you are usually allowed to keep your home and vehicles provided you continue to make your normal monthly payments to the mortgage or finance company.

Declaring Chapter 7 Bankruptcy Can:

  • Wipe out debt
  • Stop creditor harassment
  • Stop wage garnishment
  • Stop eviction
  • Stop foreclosure
  • Save your home and car

Chapter 13 Bankruptcy

Declaring Chapter 13 bankruptcy can be a wise decision for your financial situation and help if you are behind on your mortgage payments or have assets that you could lose by filing Chapter 7 bankruptcy. Often times, you can protect your property and obtain debt relief by filing Chapter 13 bankruptcy.

Chapter 13 is a repayment plan. It is a federal law designed to help single and married individuals (including business owners) repay a portion of their debts with dignity and peace of mind. A plan for debt repayment is created by the attorney and you, and then approved by the U.S. Bankruptcy Court. Upon successful completion of the plan, the bankruptcy is discharged.

Chapter 13 bankruptcy filing may:

  • Allow you to stop a mortgage foreclosure sale of your home.
  • Give you up to five years to catch up on mortgage and real estate tax payments.
  • Allow you up to five years to pay off the lesser of the value of your vehicle or the actual amount owed on your vehicle. It may also reduce the interest rate you are paying.
  • Stop the repossession of your vehicle.
  • Stop the IRS from garnishing your wages and eliminate penalties and additional interest.
  • Allow for the repayment of child support arrearages (excluding interest).
  • Eliminate credit card and other unsecured debts with no or greatly reduced payments.
  • Help you regain your driver's license if it has been suspended due to unpaid fines.

Deciding to declare bankruptcy can be a complex and difficult decision-making process. We understand the stress and sleepless nights involved when debt is mounting and creditors are calling. We are dedicated to providing quality and cost effective legal guidance to our clients throughout this process and beyond. To schedule a free and confidential consultation with the attorney regarding bankruptcy concerns please call our office at 360-536-4065.