How A Chapter 7 Bankruptcy Is Different From A Chapter 13 Bankruptcy

There are a couple of different kinds of bankruptcies, but there are two chapters that apply to individual consumer filers. Individuals, and married couples, most typically file a bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code. Both chapters will allow you to eliminate debt, but the way you get to this result is not the same. If you are thinking about filing for bankruptcy, it is important to first understand the options available to you and how the determination is made as to which chapter you qualify to file.

A Chapter 7 bankruptcy is different from a Chapter 13 in the following ways:

•         A Chapter 7 is a liquidation of debts while a Chapter 13 is a reorganization of debts. This means that in a Chapter 7 you are able to get rid of certain debts, and in a Chapter 13 you come up with a repayment plan.

•         A Chapter 7 lasts about 3 to 6 months, but a Chapter 13 can take up to 5 years to complete.

•         If you want to keep your car in a Chapter 7, chances are you will have to reaffirm the debt and repay it according to the terms of your original car loan. But in a Chapter 13 you can reduce the balance by paying only the value of your car instead of the balance on the loan, and you might even get to pay the reduced amount at a lower interest rate.

•         In a Chapter 7 if you are behind on your house payments the mortgage holder can require you to get caught up all at once, but in a Chapter 13 you can pay the arrearage over time.

•         You can eliminate all of your unsecured debt, like a credit card or payday loan, in a Chapter 7 case but in a Chapter 13 case you have to pay back at least a portion of your unsecured debt load.

Most people prefer to file a Chapter 7, because it is shorter and lets you eliminate credit card debts. But that does not mean Chapter 13 cases are not helpful. There are plenty of benefits to filing a Chapter 13 bankruptcy case, and we can help you realize those benefits. The type of case you are eligible to file depends on your particular financial condition, and how that compares to the amount of secured debt you owe. Let us tell you what your options are, and then let us help you put a plan in action.

For more information about the different types of bankruptcy cases, call us today or reach us online at www.law-ri.com. We will help by looking at the facts of your case and giving you options to reach your financial goals.