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

On Behalf of | Jan 22, 2020 | Bankruptcy

If your debt situation has reached the point where you have begun to think that bankruptcy may be your only option, you need to know about the two main types of bankruptcy especially designed for individuals. As FindLaw explains, Chapter 7 and Chapter 13 both provide debt relief, but each has its own advantages and disadvantages.

Both Chapter 7 and Chapter 13 feature an automatic stay once you file. Your creditors cannot hound you for debt repayment during this period. The similarities end here, however.

Chapter 7

Chapter 7 represents your simplest and fastest bankruptcy option. Most Chapter 7 bankruptcies take only three to four months from beginning to end. In addition, if credit card debt is your biggest problem, Chapter 7 discharges virtually all of your consumer debt, including credit card debt. Nevertheless, if keeping your home out of foreclosure is your biggest concern, Chapter 7 probably is not for you. You can forestall foreclosure with Chapter 7, but you likely cannot prevent it altogether.

Chap0ter 13

Unlike Chapter 7 which is a discharge procedure, Chapter 13 is a debt reorganization procedure. Here you get the opportunity to renegotiate your debts, including your home mortgage, with your respective creditors. This often results in decreased remaining balances and/or better repayment terms. Then you devise a plan to pay down these debts over an extended period, usually three or five years. At this point, the court will discharge whatever unsecured debts you chose not to include in your plan.

Your ultimate choice of which form of bankruptcy works best for you will depend on the nature of your debts and what you hope to accomplish.