Key Differences Between Between Chapter 7 and Chapter 13 Bankruptcy

File for Bankruptcy Key Differences Between Between Chapter 7 and Chapter 13 Bankruptcy

What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

People often ask "what is the difference between Chapter 7 and Chapter 13 bankruptcy?" when they hear these terms thrown around. It is easy to see how people can get confused about something that is not often explained well in our society. Despite the lack of understanding in the general public, there is no question that knowing the difference between these two types of bankruptcy is undoubtedly important. After all, how is someone supposed to decide for themselves which form of bankruptcy makes the most sense for their circumstances if they don't know the difference? That is where DoNotPay can be helpful.

What Are Some Differences Between Chapter 7 and Chapter 13 Bankruptcy?

When an individual is looking to file for bankruptcy, they must determine, with the help of their attorney, which type of bankruptcy makes the most sense in their circumstances. Chapter 7 and Chapter 13 bankruptcies are both on the table, and it is vital that the individual is given the tools they need to know how to select between the two. Let's review a few differences between the two types.

Chapter 7 BankruptcyChapter 13 Bankruptcy
  • Income thresholds that must be met
  • Around three to five months to have the entire plan go through and for the debts to be discharged
  • Allows debtors to discharge most of their current debts and get a fresh start on their financial life
  • Property can be sold to try to satisfy certain debt requirements
  • The chance the create a payment plan with creditors in order to get them repaid on a schedule that is easier for you to meet
  • The ability to keep your property protected from repossession
  • The chance to make things right with creditors and perhaps avoid taking too big of a hit on your credit score

Each type of bankruptcy has certain advantages and disadvantages, and it is best to take the advice of an attorney who works on these matters as to which type makes the most sense for your circumstances. Both types are available to individuals, but you will need to check to see if you qualify for Chapter 7 protection as there are certain income thresholds that have to be satisfied in order for this type of bankruptcy to even be considered.

Why Might Bankruptcy Make Sense?

There are plenty of people who may try to dissuade you from filing for bankruptcy at all. They will often point to the idea that filing for bankruptcy is some kind of moral failing or that it can be extremely harmful to your credit score. While the credit score damage is a legitimate concern, you should quickly brush off people who want to claim that bankruptcy is a moral failing. It turns out that more than 1.5 million Americans file for bankruptcy each year, and that number has only been growing. This goes to show that you are not the one who has a moral failing if you are unable to meet your financial obligations. It actually shows that the system is skewed so badly that many people find themselves unable to afford to even keep their bills up like they would like to.

Bankruptcy might make sense if your debts have become so overwhelming that there is no reasonable way for you to get out from under them. Of course, you should carefully consider any alternatives there may be to filing bankruptcy if you don't have to, but sometimes you have no choice but to do so. If you are backed into a corner with it like this, then you might need to just go for it and start your new financial life as a result.

How You Can File For Bankruptcy Through DoNotPay

How to file for bankruptcy using DoNotPay:

If you want to file for bankruptcy but don't know where to start, DoNotPay has you covered in 5 easy steps:

  1. Search for File for Bankruptcy on DoNotPay.

     

  2. Put together a list of your debts, expenses, and assets. If you need help accessing information like your credit report, DoNotPay can help you get your report.

     

  3. Let DoNotPay walk you through your bankruptcy options and help you determine whether a Chapter 7, Chapter 12, or Chapter 13 bankruptcy is right for you.

     

  4. DoNotPay will then help find the best credit counseling course near you, which you need to complete before filing your bankruptcy forms.

     

  5. Lastly, DoNotPay will gather all of the forms you need (including available fee waivers) and help you locate your nearest bankruptcy court. All you have to do is complete the required forms, prepare your filing fee, and file the application with your local court.

     

And that's it. Once done, the court will give you:

  • Your bankruptcy case number
  • The name of your bankruptcy trustee
  • The date, time, and location of your meeting with your trustee

At this point, your case has been filed. Congrats! The automatic stay now protects you from all debt collectors. Your trustee will then contact you for further financial documents you will need to provide. Make sure to attend your meeting as well as complete the post-filing bankruptcy debtors course.

Your Next Steps

Once you have finished the process of filing for bankruptcy, you will want to put yourself in a position where you don't end up in the same quagmire again going forward. Therefore, you need to take the time to learn a bit more about your finances and do the following:

  1. Look for ways to strengthen your income
  2. Try to avoid taking out new debt
  3. Learn to live below your means

If you can take those steps in the right direction, then you can put this bankruptcy thing behind you once and for all. Sometimes it just takes a little nudging in the right direction to help people see their path forward.

Want your issue solved now?