Chapter 7 Bankruptcy Vs Chapter 13

8 May 2017
 Categories: Law, Blog


If you are considering using bankruptcy as a way to get a fresh start, it will be important to understand the differences between Chapter 7 and Chapter 13. These are the two main options you have, but you may prefer Chapter 7 over 13. The only problem is, not everyone will qualify for Chapter 7. Here are several things to know about qualifying for Chapter 7 and the differences between the two branches.

What It Takes To Qualify

The main thing factor involved with qualifying for Chapter 7 bankruptcy is your income. When you meet with an attorney to discuss your situation, the attorney will complete a means test to see if you meet the income qualifications for Chapter 7. If you do, the lawyer will most likely recommend using this branch; however, the types of debts you have can impact this decision. There are several other factors that can also impact this decision.

The means test will look at your income for the past year. If your income is equal to or below the median income in the state you live in, you will be able to use Chapter 7. If your income is greater than this amount, you will have to use Chapter 13 if you want to proceed.

The Main Differences

The reason you may prefer Chapter 7 over Chapter 13 is due to the way each branch handles debts. When using Chapter 7, all qualifying unsecured debts will be forgiven. In other words, these debts will be wiped away, and you will never have to pay a dime for them. Chapter 13 is very different from this, because Chapter 13 requires repaying debts. You may have to repay 100% of the debts you owe, or you might be able to get by with paying only a portion of them. The amount you must repay will be based on the debts you owe and your income.

The other key difference is the time frame required for each. Chapter 7 is quick to use. Once you file, your case will be discharged within a few months, most likely, and that will be the end of it. Chapter 13 involves a three to five-year time frame, and this is used for you to make your payments. If you want your case to be over quickly, Chapter 7 is the better option.

There are many other factors to consider when comparing which branch is better for you, and meeting with a bankruptcy attorney is the best way to learn more about this. For more information, contact companies like Dunbar & Dunbar.


Share