Chapter 7 v. Chapter 13 Bankruptcy
If you’re struggling with debt, bankruptcy can offer a fresh financial start. The two most common types of consumer bankruptcy are Chapter 7 and Chapter 13. Each has different benefits, eligibility requirements, and consequences. Understanding the differences can help you choose the best option for your situation.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, often called “liquidation bankruptcy,” is designed for individuals who cannot repay their debts. It allows you to discharge (eliminate) most unsecured debts, such as:
✔ Credit card balances
✔ Medical bills
✔ Personal loans
Who Should Consider Chapter 7?
- Individuals with little ability to repay debts.
- Those with mostly unsecured debt (credit cards, medical bills, etc.).
- People who want a fresh start without a long repayment plan.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, known as “reorganization bankruptcy,” allows individuals to repay their debts over time through a court-approved repayment plan.
Key Features of Chapter 13:
- Debt Repayment: Instead of eliminating debts immediately, you make monthly payments based on your income and expenses.
- Asset Protection: Unlike Chapter 7, you don’t have to sell assets to pay creditors.
- Eligibility Requirements: Your secured and unsecured debts must be below certain limits set by federal law.
Who Should Consider Chapter 13?
- Individuals who can afford monthly payments.
- Homeowners facing foreclosure who want to catch up on mortgage payments.
- People with non-dischargeable debts (like certain taxes or child support) that can be repaid through the plan.
Which Bankruptcy Option Is Right for You?
Choosing between Chapter 7 and Chapter 13 depends on your financial situation, income, and long-term goals. If you need help deciding which path is best for you, The Law Office of Tramaine Y. Tinner, PLLC can provide expert guidance. Contact us today for a consultation!