Posted on: 30 September 2022
Bankruptcy is a great process for getting back on your feet when you're in debt. While there are many forms of bankruptcy, most people file Chapter 7 or Chapter 13 bankruptcy. If you would like to know more about how these two processes differ, keep reading.
Who Is a Good Candidate for Chapter 13 Bankruptcy?
You may be a good candidate for Chapter 13 bankruptcy if you don't pass the means test for Chapter 7 bankruptcy. First, calculate your current monthly income. If it is less than the state's median income for a family of the same size as yours, you qualify for Chapter 7 bankruptcy.
Even if your income is higher than the state's median, you may still qualify for Chapter 7 if you don't have disposable income. However, there are still some limitations on Chapter 13 bankruptcy. If your debt is too high, you may not qualify for Chapter 13.
What's the Biggest Difference Between Chapter 13 and Chapter 7?
The biggest difference between Chapter 13 and Chapter 7 bankruptcy is the repayment plan. With Chapter 7 bankruptcy, you pay off what you can and then discharge the rest of the debt.
With Chapter 13 bankruptcy, the debt is reorganized, and you must repay some of it over the course of a few years. Any debt left after the repayment period is wiped out. Of course, this also means that the Chapter 13 bankruptcy process takes a lot longer than the Chapter 7 bankruptcy process.
During this repayment period, you must report any excess income or new debt to your attorney. Excess money, such as your tax return, will likely be used to repay some of the debt.
What Are the Advantages of Chapter 13 Bankruptcy?
If you file Chapter 13 bankruptcy, you don't have to liquidate your assets, which makes it easier to keep your vehicles and home. On top of that, Chapter 7 bankruptcy appears on your credit report for 10 years, but Chapter 13 only appears for 7 years.
Plus, most of that time is during the repayment period, so by the time the repayment period is over, the bankruptcy will almost be removed, making it easier to get a new car or home. Both Chapter 13 and Chapter 7 are removed automatically, so you don't have to do anything to get them off your report.
Chapter 13 bankruptcy requires you to repay some of the debt, but it is off your credit report faster. If you don't qualify for Chapter 7, Chapter 13 may be the right choice to regain control of your life. If you would like to know more, contact a Chapter 13 bankruptcy attorney.Share