What are the main differences between a Chapter 7 and Chapter 13 bankruptcy?


A Chapter 7 bankruptcy allows people who qualify a complete liquidation or elimination of unsecured, non-priority debts without further repayments. Some of the requirements to qualifying for a Chapter 7 bankruptcy are based on household income, income versus household expenditures, the value of the assets you own, among other factors. Attorney’s fees and other costs for a Chapter 7 case are paid before the case can be filed.

A Chapter 13 bankruptcy is essential a repayment plan where that allows the debtor to restructure his/her debts into a monthly payment for a three or five year period. Many people file a Chapter 13 as opposed to a Chapter 7 bankruptcy because they do not meet the requirements for a Chapter 7 petition.

To file a Chapter 13 case, a debtor must have sufficient income, after monthly expenses, to fund a Chapter 13 plan. The monthly payments paid into the plan are divided up and a portion is paid to each creditor by the Bankruptcy Trustee. Also paid out of the plan are administrative costs of the case and attorney’s fees. For a home mortgage where the debtor is behind on payments but wants to keep the property, generally the arrearage (or the amount that is behind) is included in the plan and the regular payment must to the mortgage company outside the Chapter 13 plan.

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