Chapter 13 verses Chapter 7

What is the difference between a Chapter 13 Bankruptcy (a.k.a. Debt Consolidation) and a Chapter 7 Bankruptcy (a.k.a. Straight Bankruptcy)? These are things that we go over in a free Debt Consultation. If you want to see how bankruptcy might benefit you, then call 210-930-7000 to schedule your appointment for a free Debt Consultation to review ALL your options, including bankruptcy.

CHAPTER 7 BANKRUPTCY

Chapter 7 bankruptcy is the form of bankruptcy where the bankruptcy case is only open for 90 days and there are NO payments made to a Trustee. This form of bankruptcy is only for those clients that have no money left over to make a plan payment to a Trustee. Generally speaking, this form of bankruptcy is for individuals who cannot afford to repay their unsecured debt, such as credit cards, medical bills and personal loans.

A Chapter 7 bankruptcy is sometimes called straight bankruptcy or liquidation, but most people that file a Chapter 7 never have to liquidate anything because everything they own is protected through exemptions. In the rare case that someone files bankruptcy at a time that they have non-exempt property, the Chapter 7 Trustee is allowed to collect and sell non-exempt property. The proceeds from the sale of non-exempt property are used to pay creditors. Consumers are allowed to claim certain property as exempt, such as house, car, household goods, retirement, etc.  That means, for the average family and for about 98% of the cases we file, there is no property for the trustee to gather to use to pay creditors.  The purpose of allowing individuals to claim certain property as exempt is to allow them to have a fresh start.

A Chapter 7 bankruptcy may be for you if your income has ended or has decreased to the point that you are only about to cover your living expenses and no longer able to pay your unsecured debt, like credit cards, medical bills or personal loans. Most of our clients that filed Chapter 7, did so because their incomes reduced or stopped as a result of disability, retirement, loss of job or overtime, or bad health.  Many of our Chapter 7 clients also needed relief because their expenses increased to the point that they could never pay back their unsecured debts, which included high credit card debt, medical bills or lawsuits.

A typical Chapter 7 bankruptcy is finished 90 days after the case if filed, then the court issues the debtors a discharge in bankruptcy, which means that the person who filed bankruptcy is no longer personally liable for the debts covered in the bankruptcy. The only debts that are not affected by the filing of the Chapter 7 bankruptcy are those debts that you choose to keep, or those certain types of debts that the law provides are non-dischargeable, such as child support, certain taxes, student loans.

CHAPTER 13 BANKRUPTCY

A Chapter 13 bankruptcy is also known as Debt Consolidation, whereby you are required to repay your unsecured creditors only as much as you can afford. As an example of the power of a Chapter 13 bankruptcy, you can consolidate all your medical bills, all your credit cards and all your personal loans for as little as $125 per month, depending on your income and expenses.

Under a Chapter 13 bankruptcy, a debtor proposes a 3 - 5 year repayment plan to the creditors. The amount to be repaid is determined by several factors including the debtors' disposable income.  Whatever dischargeable debts in the plan that are not paid in-full by the end of the plan, are discharged in bankruptcy at the end of the plan. That means that you no longer have any personal liability for those debts after you complete the plan.

A Chapter 13 bankruptcy may be for you if:

• You cannot afford a Chapter 7 case.
• You want to pay your creditors, but you don’t have enough money to stay current on your bills.
• Your home is facing foreclosure, and you CAN afford the monthly payment but you CANNOT afford to catch-up on the missed payments or the back payments.
• You need more time to get caught up on your vehicle loan.
• You need cheaper payments on the things you want to keep.
• You have too much income.
• You want to protect a co-signer.
• You made too many charges, balance transfers or cash advances on your credit cards in the previous 24 months.
• When you have non-exempt property that you would lose in a Chapter 7 case.

A Chapter 13 bankruptcy typically reduces the amount of money that you pay each month.  In short, a Chapter 13 bankruptcy will allow you some breathing room so you can reorganize your finances.

Call us at 210-930-7000 to schedule a free initial consultation to see how bankruptcy would apply to your specific situation

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