The Differences Between Chapter 7 and Chapter 13 Bankruptcy
1) Eligibility Requirements Determine EverythingBefore contacting Bankruptcy attorneys, know that not everyone qualifies for the same bankruptcy proceeding. Which type of bankruptcy a person qualifies for depends upon both the individual’s financial situation and ability to repay certain outstanding debts. To qualify for chapter 7 bankruptcy, an individual’s disposable income must be low enough to pass the chapter 7 means test. For chapter 13 proceedings, an individual cannot have more than $3,947,255 outstanding in unsecured debt or $1,184,200 in secured debt to remain eligible. Chapter 7 is available for both individuals and businesses whereas chapter 13 is available only to individuals.
2) Asset Liquidation vs Debt Repayment
3) The Timeframes Involved Are DifferentWhen a person files Chapter 7 bankruptcy, it typically takes three to five months for that person to receive a discharge, as it bases the discharge upon the liquidation of the individual’s valuables to settle outstanding debts. With chapter 13 bankruptcy, it typically takes three to five years for a person to receive a discharge as the discharge depends on the completion of all planned payments ordered by the court during the bankruptcy proceedings.
The different types of bankruptcy have different advantages and disadvantages. The primary advantage of chapter 7 bankruptcy is that it allows individuals and businesses to settle their outstanding debts and get a fresh start on building a new financial future. The primary advantage of chapter 13 bankruptcy is that it allows individuals to keep most of their property upon completion of their court-ordered payment plans. Each one depends upon both eligibility requirements and individual needs. If you or someone you know is facing bankruptcy, contact a consumer bankruptcy attorney today for more information.