Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 and Chapter 13 Bankruptcy Comparison

Bankruptcy is a legal proceeding in which a bankruptcy court can protect a person who cannot repay all of their debts.  In a bankruptcy, the court can discharge (eliminate) some debts and give a person more time to repay other debts.

Most bankruptcies are Chapter 7 or Chapter 13 bankruptcies.  Chapter 7 and Chapter 13 each have their own requirements, benefits, and shortcomings.

Qualifying for Chapter 7 Bankruptcy

A person can qualify for Chapter 7 bankruptcy if their monthly income is not high enough to pay for certain “allowable” monthly living expenses and still have income left over, after paying these expenses, to make monthly payments to their creditors.  Also, to enter a Chapter 7 bankruptcy, the person has to be willing surrender “non-exempt assets” they may have.

Qualifying for Chapter 13 Bankruptcy

A person can qualify for Chapter 13 bankruptcy if they do have income left over every month to make some monthly payment to creditors after if after paying for the “allowable” monthly living expenses described above.

Benefits of Chapter 7 Bankruptcy

Some benefits of a Chapter 7 bankruptcy is that it is quicker and less expensive than a Chapter 13 bankruptcy.  In a Chapter 7 bankruptcy, the debtor pays a filing fee and attorney’s fees, and receives a bankruptcy Discharge approximately 6 months later, eliminating all dischargeable debt.  In a Chapter 13 bankruptcy, the debtor has to make monthly payments for 3-5 yrs before receiving a bankruptcy Discharge of all remaining dischargeable debt.

Benefits of Chapter 13 Bankruptcy

Some benefits of a Chapter 13 bankruptcy over a Chapter 7 bankruptcy: it can allow a person to keep a house that is in foreclosure or a car that is subject to repossession; it can allow a person to strip (eliminate) 2nd mortgages or cram down (reduce) automobile loans; it can allow the Debtor to keep “non-exempt assets”; and, it can discharge some debts that can’t be discharged in a Chapter 7 bankruptcy, such as debt to an ex-spouse from a divorce.

Bankruptcy Eligibility Requirements

Before filing for bankruptcy, a person should carefully consider whether they are eligible for Chapter 7 bankruptcy or Chapter 13 bankruptcy and whether they are sure of their supporting documentation.

In both Chapter 7 and Chapter 13 bankruptcy, the debtor is required to provide extensive documentation, complete many forms, and answer questions at a hearing, called the “341 Hearing” or “First Meeting of Creditors”.

Bankruptcy has many eligibility requirements to meet and questions will arise as a person attempts to determine if they qualify. Any mistake or misunderstanding might result in having their assets seized or their bankruptcy denied. Therefore, it is recommended that a person use an attorney to file for bankruptcy who understands all of the questions and requirements for bankruptcy.

How James Lieb Helps Clients with Chapter 7 and Chapter 13 Bankruptcy

Attorney James Lieb helps clients carefully evaluate their eligibility for bankruptcy, helps them complete the extensive bankruptcy application, helps them compile the required documents, and represents them at the First Meeting of Creditors. If you are in need of affordable representation to help with bankruptcy, please call attorney James Lieb.