Chapter 7 and Chapter 13 Bankruptcy Differences

Filing for bankruptcy requires a bit of work. You don’t just fill out a form, hire an attorney and submit the paperwork to the courts. You have to meet eligibility standards, complete bankruptcy petition forms, complete credit counseling classes and then hire an attorney to mitigate the process for you. For married couples, single-parent families or business owners, filing for bankruptcy will either reorganize your finances to help you meet your payments or give you a fresh start.

Chapter 13

Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows individuals to consolidate all their financial debt into one monthly payment. However, the most common reason why people file for Chapter 13 bankruptcy is to prevent a home from going into foreclosure or stopping IRS collection. Regardless of why you file, Chapter 13 stipulates that people who file must maintain a steady income and repayment plans must last 5 years from the date bankruptcy goes into effect. In addition, individuals who decide to file for Chapter 13 will also be required to attend mandatory credit card counseling courses, pay a $274 filing fee, and any additional attorney fees. Your attorney fees will be consolidated into your monthly fees, so even if you visit a Woodland Hills bankruptcy attorney, your fees will automatically be factored into your monthly payments.

Unlike Chapter 7, Chapter 13 bankruptcy restructures your debt and makes it easier to repay student loans, parking tickets and alimony payments. In order to qualify for Chapter 13, you must meet the monthly income requirements, which may include income from your social security, pension and place of employment.

Chapter 7

Chapter 7 bankruptcy offers folks a fresh start, eliminating almost all of their outstanding debt; this does not include child support payments, alimony payments or student loans. As with Chapter 13, you will have to pay a filing fee and attend credit counseling classes, however, you can only file for Chapter 7 once every 8 years, while with Chapter 13 you can file as often as you want (although most courts will discourage you from doing so). Chapter 7, also called liquidation, uses your current assets to pay back your debtors, so you may lose your home, car and personal possessions; however, only a certified attorney can tell you for certain. So say you visit a Simi Valley bankruptcy attorney you may find out that you can save your home, car and personal belongs but still have your other assets liquidated.

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