Difference between Chapter 7 and 13 Bankruptcy

Chapter 7 Bankruptcy Basics

  • What is Chapter 7 Bankruptcy? It is a process provided for under United States Federal Bankruptcy Law by which you are entitled to a fresh start.
  • Chapter 7 bankruptcy may eliminate most kinds of unsecured debt. Some examples of unsecured debts Chapter 7 may eliminate credit cards, medical bills, most personal loans, judgments resulting from car accidents, and deficiencies on repossessed vehicles.
  • In addition to getting rid of your debt, Chapter 7 allows you to typically keep all of your property. As long as your car and mortgage payments are current, and there is no significant equity in your property, we should have no problem making the arrangements for you to reaffirm the debt; that is our goal with Chapter 7.

Chapter 13 Bankruptcy Basics

  • Are you trying to save your home from a foreclosure? Is the "repo" man looking for your car? If so, Chapter 13 bankruptcy repayment plan may be the answer!
  • What is Chapter 13 bankruptcy? It is an interest-free debt repayment plan through which you consolidate your debts and make a payment on your debt over a 3 to 5 year period. While in a Chapter 13 debt repayment plan, the creditors cannot collect from you, and the creditors are required by a Federal Court order to adhere to the terms of the plan.
  • One very important thing to remember about Chapter 13 bankruptcy is that you must be working or have a consistent source of income for your repayment plan to be approved by the court. Not only must you be able to pay for your monthly living expenses, but you must be able to make a payment to the court to consolidate your debts.
  • Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, student loans, credit card debts and other secured debts. All outstanding debts must be included in the Chapter 13 bankruptcy consolidation.

Stop Foreclosure Immediately

  • If your home is presently in foreclosure, a Chapter 13 bankruptcy filing will stop the foreclosure process any time prior to the sale, and allow you to repay your mortgage arrears through your Chapter 13 bankruptcy. You will still be obligated to make all future mortgage payments directly to the mortgage company, but they may not foreclose to collect any outstanding mortgage payments.