Consumer bankruptcy law can be complex. It’s good to consult with an experienced attorney about bankruptcy alternatives and the impact your choice will have on your financial future. A Chapter 7 and 13 comparison in the broadest sense shows Chapter 7 bankruptcy to be the faster, more affordable bankruptcy. It is best for individuals with restricted assets who may be okay with losing unexempt personal assets to repay debt.
Chapter 13 is for people with consistent income and allows for debt restructuring (interest rates and payment periods), catching up on missed payments, retaining personal assets and providing time to rebuild with protection. Both stay on your credit report for seven to ten years. The following diagram helps explain details.
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|Type of Bankruptcy||Chapter 7||Chapter 13|
|Purpose||Liquidation||Adjustment, reorganization, time to make payments|
|Amount||Most debts completely discharged.||Pay percentage of debt owed. Reduce interest rates and consolidate some debts.|
|Property||Only exempt items are kept.|
If a debtor wants to keep an item like a car, payments must continue on that item.
|All property is retained but the payments must be made or the lender can continue with foreclosure.|
|Time frame||3-5 months||3-5 years upon completion of all plan payments|
|Trustee||Court appointed to determine whether there are unexempt assets which can be administered.||Court appointed to determine whether there are unexempt assets which can be administered.|
|Credit||Stays on your credit for up to 10 years. Ask us about our partnership with "720 credit score."||Stays on your report for up to 7 years post discharge. Ask us about our partnership with 720 credit score.|
|Pros||Allows debtors to quickly discharge most debts and get a fresh start.||Allows debtors to keep their property and catch up on missed payments – mortgage, car, etc.|
|Cons||Trustee can sell non-exempt property. No way to catch up on missed payments; can lose personal property.||Must make monthly payments to the trustee for 3-5 years.|
|Eligibility Restrictions||Limited by disposable income. Must pass the Chapter 7 means test.||Must have regular income. Must not be above the Chapter 13 debt limit.|
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