Bankruptcy Chapter 7 vs 13

Filing bankruptcy can be daunting but having to choose which one should be filed can also make you stressed out. Choosing whether to file for bankruptcy Chapter 13 or Chapter 7 is a major financial decision These are some popular concerns asked by those who are facing financial difficulties. Both options are very similar, but some key differences make it essential to understand all your possible legal options before making a final decision. 

This article describes some of the differences between chapters 7 and 13. Remember: No matter your financial situation, there is a chapter of the bankruptcy code for you! Consult a competent bankruptcy attorney in Pasadena to make sure you make the right choice.

Chapter 7  versus  Chapter 13 bankruptcy


Bankruptcy under Chapter 7

Chapter 7 petitioners get their discharge within three to four months after filing their bankruptcy petition with the United States bankruptcy court. 

Creditors cannot contact you once you file a lawsuit. Although bankruptcy law requires you to sell some property to satisfy unsecured creditors, if you’re like the majority of Americans, you’ll be allowed to retain everything you own. 

This is because bankruptcy exemptions impose restrictions on the types of property that may be used to satisfy creditors. The amount of debt you may have in Chapter 7 is unlimited, but you cannot earn an excessive amount of money. 

That is a significant distinction between Chapter 7 and Chapter 13 bankruptcy.


Bankruptcy under Chapter 13

Chapter 13 bankruptcy entails the establishment of a repayment plan. While creditors may object to the amount of money they get under the Chapter 13 plan, if approved by the bankruptcy court, they are obliged by it. 

Your financial situation determines the monthly payment. Unlike under Chapter 7, filing Chapter 13 might result in a reduction in the interest rate and, in some instances, the amount owed on your auto loan. 

Because creditors get some money under Chapter 13, filers are not compelled to surrender any non-exempt property. Unpaid debt is discharged in a Chapter 13 bankruptcy when the three- to five-year repayment plan is completed.


Chapter 13 Bankruptcy Risks

  1. Chapter 13 is far more likely to fail than chapter 7.
  2. Excessive fees
  3. This might affect your financial status.
  4. You risk losing your house and other essential possessions if your bankruptcy is unsuccessful.
  5. Budgeting skills are weakened as a result of failure.


The Dangers of Filing for Chapter 7 Bankruptcy

  1. You cannot file Chapter 7 if you make an excessive quantity of money.
  2. It does not entirely erase unsecured debts.
  3. Specific forms of property are like to be lost.
  4. Your Bankruptcy Chapter 7 filing does not protect others.
  5. Even if you have perfect credit, you are nearly going to encounter a slight barrier.


How to be a Compelling Chapter 7 Candidate

Chapter 7 bankruptcy is a new beginning. It may assist you in rebuilding your credit and eliminating debt. However, this is not a simple task.

Here are some time-saving ideas.

Not everyone can file Chapter 7. To establish if you are eligible for Chapter 7 bankruptcy, you must pass the region’s Means Test.

Assume you previously filed a Chapter 7 case but never completed it, and hence will not be discharged. In such a situation, you may file a new Chapter 7 case at any time, provided the bankruptcy court does not expressly forbid you from filing again during the preliminary trial.

Finally, you must take a pre-bankruptcy credit counseling course provided by certified credit counseling firms six (6) months before filing for bankruptcy. Once the mentorship is complete, you will obtain a certificate that must be filed with the bankruptcy court as an exhibit.

You will also be forced to undergo a debtor’s education course after filing your bankruptcy case, which is meant to encourage solid financial behaviors following your temporary setback.


How to be a compelling chapter 13 candidate

A bankruptcy Chapter 13 is intended for debtors who do not qualify for a Chapter 7 debt discharge owing to a lack of financial resources. If you match the following conditions, it may be acceptable for you:

  • Possess secure employment that offers a consistent source of income
  • Possess substantial assets
  • Can continue to fulfill financial obligations such as energy bills, alimony, and child support

To file for bankruptcy Chapter 13, you must fulfill any of the following criteria.

  1. You pass Chapter 7’s means test.
  2. Your debt exceeds the Chapter 13 limit.
  3. You didn’t file a tax return with the Internal Revenue Service in the previous four years.
  4. You work as a stockbroker or commodities broker.
  5. Within the past 180 days, your last bankruptcy case was dismissed.


Pasadena Bankruptcy Attorneys Can Help You Make The Best Financial Decision For You And Your Family!

It’s important to note that there’s no one-size-fits-all approach to choosing between a Chapter 7 and a Chapter 13 bankruptcy. Every person has different needs, and every situation is unique. That said, if you need help with your finances, we encourage you to consult our Pasadena bankruptcy lawyers so we can help you decide which type of personal bankruptcy is right for you.

Whether Chapter 7 or 13, we’ll work hard with your best interests at heart and that you get the fresh start you deserve.