What really is the difference between Chapter 7 and 13 bankruptcy?

When bankruptcy becomes a necessity because of a bad financial situation, an individual will have to determine whether they should file for Chapter 7 or Chapter 13 bankruptcy. Understanding the differences between them is very important because they are separate and unique filings.

By the time you finish reading this, you will know more about Chapter 13 bankruptcy. As we all know there are a number of different types of bankruptcy and it is essential to at least know the difference. Chapter 13 is not available for all kinds of situations and it should only be filed by the best qualified candidate.

Usually (depending on the situation), individuals try to file for bankruptcy under Chapter 7 in order to get most of their outstanding debts discharged. The time taken to do this is also quite less as compared to filing under Chapter 13. You can file for bankruptcy under Chapter 7 only if you pass the Means Test. Unlike Chapter 7, filing under Chapter 13 will give you the chance to repay your outstanding debts over a longer period of time, usually between 3 to 5 years. You also have the chance to keep all your property.

As good as it may seem that filing bankruptcy will help you out of such financial mess, it can also lead to much confusion in your mind trying to figure out what is Chapter Thirteen Bankruptcy and how does it differ from chapter seven bankruptcy. Chapter 13 bankruptcy may cost you about $185 to file and it is commonly also referred to as reorganization bankruptcy and such a form of bankruptcy is generally filed by persons that wish to eliminate their debts in three to five year’s time. Under Chapter 13 bankruptcy, individuals can keep part of their possessions and also have a means to finance some of their day to day expenses while at the same time still have some money left over to pay off their debts.

Chapter 13 payments are prearranged when bankruptcy is approved through the court In most instances, a Trustee is assigned to oversee the debtor’s case and will disperse payments to creditors until accounts are paid in full. Occasionally, chapter 13 payments can be made directly through payroll deductions. Once debt reorganization has been approved, Chapter 13 payments are clearly outlined in the repayment plan and leave little room for deviation. Consistent payments must be made to repay creditors, tax liens and mortgage payments, if applicable.