Chapter 13 Vs. Chapter 7 Bankruptcy
There are two major forms of bankruptcy that cash-strapped consumers may file. Chapter 13 is a debt restructuring plan in which most obligations are repaid over time. On the other hand, Chapter 7 allows debtors to have most of their bills legally forgiven. There are several other significant differences between the two forms of bankruptcy proceedings.
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Credit Reporting
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Chapter 13 is reflected on a credit file for seven years, while Chapter 7 cases are reported to one's credit profile for ten years.
Means Testing
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Chapter 13 filers do not have to pass a federal means test. However, Chapter 7 petitioners must pass this test and prove that their income is too low to repay even part of their debt load.
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Time Frame
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A Chapter 13 payment plan takes three to five years to complete, while a Chapter 7 case can be finalized within eight months.
Assets
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Chapter 13 petitioners can often keep their house and most other assets. On the other hand, Chapter 7 filers lose most of their assets, including savings accounts.
Cost
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As of August 2009, it cost about $275 to file for Chapter 13 bankruptcy. A Chapter 7 case cost about $300. These are filing fees and do not include the cost of attorneys, if used.
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