The main difference between Chapter 7 and Chapter 13 bankruptcy is how the debtor's debts are handled and resolved.
Chapter 7 bankruptcy, also known as "liquidation bankruptcy," allows the debtor to eliminate most types of unsecured debts, such as credit card debts, medical bills, and personal loans, without making any payments to creditors. In exchange, the debtor may have to surrender some non-exempt assets, which are sold by the trustee to pay off a portion of the debts. This process usually takes about 3-6 months and may have some negative impacts on the debtor's credit score.
Chapter 13 bankruptcy, also known as "reorganization bankruptcy," allows the debtor to keep their assets while creating a repayment plan to pay off their debts over a period of three to five years. The debtor typically pays a portion of their debts, ranging from 0 to 100%, depending on their disposable income and the amount of their debts. This repayment plan is created with the assistance of a bankruptcy trustee and must be approved by the court. Chapter 13 bankruptcy can have less of an impact on the debtor's credit score, but it requires a steady income to make the payments.
Another difference is eligibility. Chapter 7 bankruptcy is available to those who pass a means test and have little or no disposable income, while Chapter 13 bankruptcy is designed for individuals who have a regular income but are struggling to repay their debts.
Overall, the best type of bankruptcy for you will depend on your individual circumstances, such as the amount and type of debts you owe, your income, and the assets you want to protect. It is highly recommended that you consult with a qualified bankruptcy attorney to explore all of your options and determine the best course of action for your situation. It is important to work with a qualified bankruptcy attorney who can help you. If you are interested in filing bankruptcy please contact Hishaw Law LLC at 1.307.228.0407 if your located within the state of Wyoming or 1.704.218.9883 if you live in the Charlotte, North Carolina area or email us at jhishaw@hishawlaw.com.
