When you are filing for bankruptcy, there are two main forms that you may consider filing. These are Chapter 7 & 13 bankruptcy which are the most common forms used by most consumers. Depending on the personal circumstances and financial situations involved, each chapter can present distinct benefits and advantages for it's consumers. It is also very important to note that several factors are considered when determining the eligibility for bankruptcy along with which chapter you may qualify for. An experienced lawyer at Badnell & Dick Co., LPA can help you during this stage of bankruptcy and explain which chapter is most appropriate for you.
The Main Differences
Both of these chapters are inherently different but the qualifying criteria is the most basic factor that sets them apart. To put it simply, debtors must pass a "means test", which takes into consideration their income in relation to the states median income in order to be eligible for Chapter 7. To file under Chapter 13, an individual must have unsecured debts such as credit card bills/medical expenses below $336,900 while their secured debts must be below $1,010,650. These include mortgages and car loans.
Another difference between the chapters is their primary uses. For example, Chapter 7 is a liquidation of assets that is commonly used when a consumer has little property or they have little funds after paying for the basic necessities month after month. On the other hand, Chapter 13 is an adjustment of debts for a consumer with a regular income, rather than a full liquidation. Chapter 13 is commonly sued when a consumer has a regular income but cannot keep a consistent payment of their debts.
In addition, Chapter 7 allows consumers to get rid of their more unsecured debt as opposed to Chapter 13 which does not get rid of debt and forces the consumer to make payment plans to pay them off. In terms of credit score, Chapter 7 bankruptcy stays on a score for 10 years while Chapter 13 only stays for 7.
Each individual situation should be looked at carefully by an experienced attorney before someone files a Chapter 13 Bankruptcy or a Chapter 7 Bankruptcy. Call Badnell & Dick Co., LPA today to discuss your situation with an expert and see if now is the right time for you.
