- The Differences Between Chapter 7 and Chapter 13 Bankruptcy
- Basics of Chapter 7 Bankruptcy
- Basics of Chapter 13 Bankruptcy
- Common Questions about Planning for Bankruptcy
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The Differences Between Chapter 7 and Chapter 13 Bankruptcy
When people start talking about personal bankruptcy, they will often throw around the words Chapter 7 bankruptcy, liquidation bankruptcy, Chapter 13 bankruptcy, and reorganizational bankruptcy. What do these words mean? Here we will try to simplify the definitions of all those terms and tell you what you need to know about them.
Chapter 7 (Liquidation Bankruptcy)
Chapter 7 bankruptcy is also known as Liquidation bankruptcy. This type of bankruptcy is typically the most straightforward type. Chapter 7 bankruptcy may also be the simplest and quickest type of bankruptcy. When you file a typical Chapter 7, a bankruptcy trustee could liquidate or sell your property and assets to pay back what debts you owe such as credit cards, medical bills, and payday loans. This type of bankruptcy is a good option to consider when you have no hopes of paying off your current debt reasonably and you have very low income or even no income. However, if you are behind on your mortgage payments or car payments, Chapter 13 bankruptcy might be a better option.
Chapter 13 (Reorganizational Bankruptcy)
Chapter 13 bankruptcy is also known as Reorganizational bankruptcy. This type of bankruptcy typically protects most assets, however the process takes longer than a Chapter 7 bankruptcy. In general, Chapter 13 bankruptcy is tedious and more complex than a Chapter 7, but it can help you adjust interest rates, loan payments, or loan amounts so you can afford your payments and keep what you own. Chapter 13 bankruptcy is typically better for you if you are behind on their mortgage or car payments and would like to keep your assets, or if you own multiple cars or other property that you wish to keep after bankruptcy. In a Chapter 13 bankruptcy, you propose a payment plan to pay off some or all of your debts and are given the chance to renegotiate the terms of your loan. Typically a Chapter 13 bankruptcy favors those who are currently employed and are able to make payments on their debts.
This is just a brief overview of the differences between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy. If you have any additional questions about personal bankruptcy, browse our website for more information and feel free to contact us at 214.748.4848 anytime. We might even post your question on our website to help other people just like you.