What is the difference between Chapter 7 and Chapter 13 bankruptcy?

On Behalf of | Jan 13, 2022 | Bankruptcy

Are you drowning in debts? If so, you are not alone. The pandemic left many Americans unemployed and without the means to pay off their debts. However, you can get rid of the financial and emotional pressure of being a debtor by filing for Chapter 7 or Chapter 13 bankruptcy. Both Chapters can help you start anew and discharge your debts, but they work differently. The right one for you will depend on your specific circumstances.

The main difference

Chapter 7 and Chapter 13 bankruptcy can eliminate your debts and prevent creditors from pursuing you, but each Chapter is different. By filing for bankruptcy under Chapter 7, you’ll get rid of most of your debts by repaying your creditors after a trustee sells some of your assets. When there is nothing left to sell, the rest of the unpaid debts will disappear.

Chapter 13 doesn’t work the same way. With Chapter 13 bankruptcy, you’ll be able to repay your debts within 3 to 5 years. Instead of selling some of your assets to repay your creditors, you would follow a payment plan. Chapter 13 bankruptcy takes more time than Chapter 7 bankruptcy, but it will let you keep everything you own.

Important considerations

The Chapter you choose must be based not only on your preference but also on your eligibility. To file for bankruptcy under Chapter 7, you must pass the means test. The means test will determine if you are eligible based on your income. For Chapter 13 bankruptcy, you must have sufficient income to repay your debts. Also, the amount of your unsecured debt must be less than $419, 275 to qualify for Chapter 13 bankruptcy.

Financial relief

You don’t need to keep carrying all that financial pressure on your shoulders. By filing for Chapter 7 or Chapter 13 bankruptcy, you can safely eliminate your debts and start anew. You could also stop your creditors from pursuing you for your debts. You deserve to live in peace, and you can get help with your finances by filing for bankruptcy under the Chapter that best suits your needs and situation.

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