Chapter 7 Versus Chapter 13 Bankruptcy

In this article, I explain when it makes sense to file for Chapter 7 bankruptcy against Chapter 13 bankruptcy, the most common form of bankruptcy in the United States. If a debtor filing for bankruptcy does not pass the means test for Chapter 7 bankruptcy or certain properties he or she wishes to retain, he or she may file for Chapter 13 bankruptcy. A debtor considering filing for bankruptcy may also apply for Chapter 11 protection under the U.S. Tax Code (IRS). [Sources: 1, 11]

Some people file for Chapter 13 bankruptcy, even if they have the means to file for Chapter 7 bankruptcy and have some debts that they cannot pay under Chapter 5. Some people with other properties or real estate they want to keep may stay under 13 years, which gives them the option to keep their property, but only if their debtors have made payments to obtain bankruptcy relief for their properties. [Sources: 5, 17]

Chapter 13, often referred to as the wage earner’s plan is another possible route. Chapter 13 bankruptcy: If you file for Chapter 7 bankruptcy, you will only have to wait four years before filing for Chapter 7 bankruptcy. For some people, it may be beneficial to file under Chapter 7 and to file Chapter 13 immediately after the closure of Chapter 7 because it allows them access to the bankruptcy district in which they live, and also because they can file as soon as possible after the expiration of the 7-year period. [Sources: 5, 6]

Since all things are equal, it is more advantageous for a debtor to pay off all his debts immediately after a Chapter 7 bankruptcy than to repay the debts. Chapter 13 Bankruptcy: If you have a forgiven debt under Chapter 7 and want it forgiven under Chapter 13, you must wait four years after filing for Chapter 8 bankruptcy before filing for Chapter 13 bankruptcy. Once you have your debts forgiven from a Chapter 7 filing, you cannot wait longer than the 7-year period after filing for Chapter 14 filing. [Sources: 1, 6]

In contrast, filing for Chapter 13 bankruptcy is subject to a repayment plan that you will maintain for the next 3-5 years. Once you have completed your Chapter 13 repayment plan, you will be entitled to the settlement of all remaining debts following your bankruptcy. [Sources: 3, 13]

Depending on the situation, this may mean that you can pay off your unrecoverable debt under a Chapter 13 bankruptcy and no longer have to deal with it later. If you do not qualify for Chapter 7 bankruptcy, you are entitled to file for Chapter 7 bankruptcy under the same repayment plan as you would under Chapter 14. [Sources: 7, 13]

First, you need to learn which kind of bankruptcy is better for you, depending on your situation. Chapter 7 or 13 bankruptcy may help borrowers in debt at the top, but it may not be as effective as Chapter 14 bankruptcy. First, you must make the payment to creditors under the same repayment plan as in Chapter 15. [Sources: 0, 12, 14]

Chapter 7 bankruptcy cancels all debt-relieving debts, while Chapter 13 provides only a small amount of debt, which can only be repaid when the creditor has been repaid. Some debts, such as mortgages, credit cards and car loans, can be repaid, allowing the debtor to pay off other debts while keeping his house or vehicle. [Sources: 1, 16]

Chapter 7 bankruptcy can help you pay off your debts relatively quickly, but the same cannot be said for Chapter 13. Some debts are not discharged in a Chapter 7 filing that you are still liable to pay, such as mortgages, credit cards, and car loans. While the completion of a Chapter 13 bankruptcy takes much longer, it also includes all unwritten debts and all debts that have been settled. [Sources: 0, 6, 13]

If a debtor’s debt is forgiven in a Chapter 7 bankruptcy, the creditor cannot prosecute you as a co-signatory or guarantor of the loan. This automatic suspension of debt collection payments prevents creditors from taking debt collection measures during the ongoing proceedings. [Sources: 1]

Chapter 7 bankruptcy is an efficient way to get out of debt quickly, but most people would prefer to file for Chapter 7 if possible. If you qualify for Chapter 11 or Chapter 13 bankruptcy and find that it meets your needs, you will want to file for it. Filing for Chapter 7 or Chapter 11 bankruptcy (or any other type of bankruptcy) will allow you to keep up business and make a fresh start. [Sources: 8, 10, 15]

If your income is high enough to qualify you for Chapter 7 bankruptcy, Chapter 13 bankruptcy is your only option. If you do not qualify for Chapter 7, you have no choice but to apply for a Chapter 13 bankruptcy repayment plan. You can afford not to pay all your debts, but if you don’t, and if your income is too high to qualify for Chapter 7 or Chapter 11 bankruptcy, then it may be the only option for you. [Sources: 2, 4, 9]



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