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Chapter 13 vs. Chapter 7 Bankruptcy: What’s The Difference?

You’ve found that bankruptcy could be the answer to your financial nightmare, but now which type of bankruptcy is going to be right for you? Chapter 13 vs. Chapter 7 bankruptcy: what’s the difference? Both can offer immediate relief to debtors and stop the harassment from debt collectors and lending institutions. But which one is right for you depends on several factors. Let’s take a look at how they each work.

Basics of Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common form of bankruptcy, and what many people think of when they hear the word “bankrupt.” Simply put, most of your assets will be forfeit and sold off by a court-appointed trustee, and that money is used to pay back your creditors. Any qualifying debt that remains after that gets discharged by the court.

Basics of Chapter 7 Bankruptcy Fort Collins, COWhen filing for Chapter 7, a list of your assets is created, and you will only be able to keep those in the exempt category. A list of your debts will also be created, and only those that are unsecured, such as credit card debt, personal loans, and medical bills, will be entered into the bankruptcy contract. Secured loans, like cars or mortgages, and certain other debts don’t usually qualify to be discharged in a Chapter 7, and you will likely still be responsible for these or may have the option of relinquishing them. In some cases, these assets may need to be liquidated as part of the bankruptcy agreement.

There are qualifications to be eligible for Chapter 7, including a state-set income limit. If you don’t qualify for Chapter 7 for some reason or don’t want to get rid of certain assets, Chapter 13 may be the better fit for your financial situation.

Basics of Chapter 13 Bankruptcy

Chapter 13 bankruptcy doesn’t liquidate anything to pay back your creditors. Instead, it offers a way for you to pay them back over time. It can be great for people who have fallen behind on mortgage payments or car payments or who got in a little over their heads but still want to pay back much or all of what they owe.

In Chapter 13, your debts will be laid out, and creditors will likely stop charging interest, or reduce the interest being charged, to help stop accumulating more debt while you repay what has already borrowed. A repayment plan will set with the help of the courts, usually over either three (3) or five (5) years. Each month, you would make a payment to your court-appointed trustee, who then pays your creditors with that money. At the end of your repayment plan, any debts that haven’t been paid back are discharged, and you will have a fresh financial start.

Which Type of Bankruptcy is Right for Me?

Determining which path you qualify for and will be the best fit for your situation is best done with a qualified bankruptcy attorney. Berken Cloyes, PC is proud to have been voted top bankruptcy attorney in Colorado for the last five years in a row by 5280 magazine. We have helped thousands of clients in Denver, Colorado Springs, Fort Collins, and surrounding areas who were in a rough spot make it out the other side and would love to see you have the same results.

Plus we offer a 100% money-back guarantee. If you qualify for bankruptcy, we guarantee the court will accept your case for filing, or you get 100% of your money back. Give us a call today to get a free, no-obligation case review by one of our caring and knowledgeable bankruptcy attorneys. (303) 623-HELP (4357).