Differences Between Chapter 7 & Chapter 13 Bankruptcy
Two types of bankruptcies are available for individual debtors: Chapter 7 and Chapter 13. Chapter 7 bankruptcy allows liquidation of virtually all consumer debts, while Chapter 13 is a structured debt-repayment plan supervised by the federal court system. Both bankruptcies have their own set of positive and negative aspects.
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Assets
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In Chapter 7 bankruptcy, most assets such as home equity and savings accounts are given up to offset creditor losses. However, Chapter 13 filers can usually keep their home and most assets.
Taxes
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In Chapter 7 bankruptcy, taxes less than 3 years old must be paid in full and not included in the case. Chapter 13 filers may include all taxes in their debt-restructuring plan.
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Credit Effects
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A Chapter 7 bankruptcy remains on your credit file for 10 years, while Chapter 13 is reported for 7 years.
Borrowing Power
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Chapter 13 filers cannot borrow more money without court consent while in their repayment plan. However, Chapter 7 filers are free to get any credit they wish as soon as their case is finished.
Costs
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As of 2009, Chapter 7 bankruptcy costs $299, while a Chapter 13 case costs $274.
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