Key Differences Between Chapter 7 and Chapter 13 Bankruptcy

October 20, 2017 Posted by kingcade

There are two main bankruptcy options available to people who are drowning in consumer debt, Chapter 7 or Chapter 13 bankruptcy. Choosing the right one is critical for success in wiping away your debts. Below is a guide that shares the basic attributes of both options to help you decide which option will work best for you.

Chapter 7 is a form of liquidation. This means the debtor’s assets are allocated among each of the creditors. In most Chapter 7 cases, debtors do not have assets above the legal threshold, which is set by state law and therefore they do not have to give up anything. The average Chapter 7 bankruptcy case lasts approximately three and a half months from filing to discharge. Approximately 96 percent of debtors who file under Chapter 7 receive a discharge of their debts.

When a debt is discharged, it is no longer legally owed. Unsecured debts such as credit cards and medical bills are typically dischargeable, with the exception of student loans. Secured debts such as mortgages or car loans are typically either relinquished or kept by continuing payments.

Chapter 13 is a form of a repayment plan. The debtor’s obligations are combined in one, regular payment calibrated to the debtor’s income. However, certain obligations such as utility bills might be paid outside the plan.

Chapter 13 plans can last anywhere from three to five years, but most are five-year plans. Approximately 41 percent of debtors who filed under Chapter 13 received a discharge of their debts and another 10 percent first tiled under Chapter 13 and later converted to Chapter 7 and received a discharge that way.

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If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at