Chapter 7 Vs. Chapter 13
Bankruptcy is the process by which individuals or organizations with unmanageable debt attempt to adjust or discharge their debts through court intervention. Before you file, you should seriously consider attempting to negotiate with creditors.
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Process
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Under Chapter 7 of the bankruptcy code, a trustee is appointed to liquidate non-exempt assets and distribute the proceeds to creditors. Under Chapter 13, you are required to formulate and execute a repayment plan for secured debts.
Assets
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Chapter 7 is usually for those with little or no assets to be liquidated. Chapter 13 is for those who have valuable assets--such as a home--that they cannot give up.
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Discharges
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It is common for all or a portion of your unsecured debts to be discharged under Chapter 7; you will usually have to pay the full amount over time under Chapter 13.
Differences
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To qualify for Chapter 7, you will have to undergo a means test to determine your ability to pay debts. Chapter 13 requires your secured debts be less than $1,010,650, and it requires your unsecured debts be less than $336,900.
Time Frame
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Filing for Chapter 7 will usually allow your unsecured debts to be discharged within a few months. Chapter 13 repayment plans typically last from 3 to 5 years.
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