Understanding the Differences Between Chapter 7 vs Chapter 13 Bankruptcy

Filing for bankruptcy can be a daunting decision, but understanding the differences between Chapter 7 and Chapter 13 bankruptcy can help you choose the right option for your financial situation.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as 'liquidation bankruptcy.' It allows individuals to discharge most of their debts. Here's how it works:

Eligibility Requirements

• Means Test: Determines if your income is low enough to qualify.
• Credit Counseling: Must complete within 180 days before filing.

Process Overview

1. File a petition with the bankruptcy court.
2. Automatic stay goes into effect, stopping most collection actions.
3. A trustee is appointed to oversee your case.
4. Non-exempt assets may be sold to pay creditors.
5. Debts are discharged in approximately 3-6 months.

For more personalized advice, consider consulting a bankruptcy attorney woodland hills ca for guidance.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also known as a 'wage earner's plan,' allows individuals to develop a repayment plan to pay back their debts over time.

Eligibility Requirements

• Regular Income: Must have a steady source of income.
• Debt Limits: Unsecured debts must be less than $419,275, and secured debts less than $1,257,850.

Process Overview

1. File a petition and propose a repayment plan to the court.
2. Automatic stay stops most collection actions.
3. Plan approval by the court, with a typical duration of 3-5 years.
4. Make regular payments to a trustee, who distributes funds to creditors.
5. Remaining eligible debts are discharged upon plan completion.

Consulting a professional, such as a bankruptcy attorney worcester ma, can be beneficial in understanding your options.

Key Differences

The primary distinction between Chapter 7 and Chapter 13 bankruptcy lies in asset liquidation versus debt repayment. Chapter 7 may require selling assets, while Chapter 13 focuses on restructuring debt.

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