What is the difference between Chapter 7 and Chapter 13?

If you are struggling with debt and the stress that comes with it, you may want to consider bankruptcy. Understanding the differences between Chapter 7 and Chapter 13 will help you make the right choice.

What is Chapter 7 bankruptcy?

If you have few assets and earn at or below the medium Tennessee income, you can easily qualify for Chapter 7. Chapter 7 bankruptcy is easier to file and is the most effective way to eliminate your debts Unlike Chapter 13, there is no repayment plan. Since the process moves faster, you can get debt relief in as little as three months and move on with life.

In a Chapter 7 bankruptcy, you will retain a certain amount of money and assets. These are called exemptions. Most people who qualify for Chapter 7 bankruptcy are able to keep most, if not all, of their property due to these exemptions. However, if you own a home and are behind on the mortgage, it is unlikely you will be able to keep your home and file for Chapter 7.

In a Chapter 7 bankruptcy, you cannot discharge debts related to spousal support or divorce, court fees, condominium or homeowners' association fees. However, some of these debts are dischargeable in Chapter 13 bankruptcy so you may prefer to go that route.

What is Chapter 13 bankruptcy?

In a Chapter 13 bankruptcy, you keep your assets and repay your debt on a predetermined schedule. Typically, you have three to five years to repay debt. Depending on the terms of the bankruptcy agreement, you either repay a portion of the money owed or the full sum.

Chapter 13 bankruptcy works well if you want to repay your debt over time, or if you earn too much to qualify for Chapter 7. If you own your home and do not want to be foreclosed upon, Chapter 13 can prevent this. Chapter 7 may delay foreclosure, but not prevent it from happening. If you want to keep your non-exempt assets, Chapter 13 allows you to do this.

With both Chapter 7 and Chapter 13 bankruptcy, certain types of debt -- including student loan debt -- cannot be discharged.

If you are thinking of filing for bankruptcy, we recommend speaking with an attorney, who can help you make the right choice and file all the paperwork correctly.

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Christopher Kerney Attorney at Law
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Gallatin, TN 37066

Phone: 615-206-3004
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