Chapter 7 / Chapter 13
What is Chapter 7 Bankruptcy
Chapter 7 is the bankruptcy provision most frequently used by individuals. Those who reside in, or own property or a business in, the United States can file for Chapter 7 bankruptcy. Chapter 7 involves the complete liquidation of a debtor’s property to pay creditors and wipe out remaining debts, giving the debtor what’s known as a fresh start. It’s important to know that Chapter 7 bankruptcy will stay on a person’s credit report for ten years. However, it is likely that if you believe you need to file for bankruptcy, your credit has already been affected by your high debt.
What is Chapter 13 Bankruptcy
The main purpose of a Chapter 13 Bankruptcy, as opposed to a Chapter 7 Bankruptcy, is to enable a debtor to retain certain assets that would otherwise be liquidated by a Chapter 7 Bankruptcy Trustee. In most cases, you can keep your home and your car under either plan (provided your equity does not exceed certain limits). However, under Chapter 7 Bankruptcy, you wouldn’t be able to keep your rental properties, antique gun collections, etc.
The goal of most Chapter 7 bankruptcies is to discharge your existing debts and allow you a *fresh start* on your finances. In other words, once your discharge is granted, you no longer need to repay the debts that were incurred before you filed your bankruptcy.
Under a Chapter 13, however, you repay most or all of your debts before your slate, so to speak, is wiped clean. And because you repay your debts, you gain certain advantages over a Chapter 7 Bankruptcy.
For more information you must check with our legal department.