Bankruptcy

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Differences Between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy

Brief Summary of Chapter 7 Bankruptcy

A Chapter 7 Bankruptcy is the most common type of bankruptcy filed by a bankruptcy attorney and is generally used to eliminate or discharge all of a person’s unsecured debts such as credit cards, medical or dental debts, car repo deficiencies, past due cell phone bills, rental payments, past due utility bills, etc.  A person filing a Chapter 7 also has the option of eliminating secured debt such as the loans securing his or her car and house, but if he or she does stop making the payments, the creditor will likely take back the house or car.

 

 

 

Brief Summary of Chapter 13 Bankruptcy

 

A Chapter 13 Bankruptcy on the other hand, is the second most common form of bankruptcy filed and is commonly referred to as a Wage Earner's or Repayment Bankruptcy.  It is a bankruptcy where a person’s finances are reorganized and a plan is developed for the person to repay a portion of his or her debts in a period of either 3 or 5 years' time. 

 

A Chapter 13 Bankruptcy is typically used in a couple of situations.  One reason a person utilizes a Chapter 13 Bankruptcy is when he or she is behind on his or her mortgage or car loan and cannot immediately pay the amount to get caught back up.  In this scenario, the person would have 3 or 5 years to pay the back amount and resume monthly payments, along with a portion of his or her other debt, which is calculated by something known as a mean test.  

Other reasons to file a Chapter 13 Bankruptcy would be if a person has significant assets that would be sold if he or she filed a Chapter 7 Bankruptcy or if a person makes more income than the amount allowed to file a Chapter 7 Bankruptcy.  In these instances, the person would have to complete the Bankruptcy Means Test to figure out the minimum monthly payments he or she would have to make for 5 years to his or her creditors before getting the rest discharged or wiped away.  

 

 

 

Differences Between

Chapter 7 Chapter 13

Chapter 7

Chapter 13

Filing until discharge is usually 3-6 months

Filing until discharge is 3 or 5 years

All debt eliminated

except for limited circumstances 

Portion of debt repaid through bankruptcy plan

Does not provide for getting caught back up on mortgage or other debts

Allows borrower to get current on mortgage or other debts through 3 or 5 year plan

The filing automatically puts a freeze on all lawsuits, collection actions, account levies, sheriff sales, repossessions, etc

The filing automatically puts a freeze on all lawsuits, collection actions, account levies, sheriff sales, repossessions, etc

Non-exempt property may be sold by the Trustee to pay-back creditors

The value of non-exempt property may be used as one of the factors to determine the amount of the bankruptcy plan

Bankruptcy Quick Links

 

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Here at Tuttle Legal, our primary focus is you. In our office, we have represented 1000s of people through some of the toughest times in their lives in civil actions, mortgage foreclosure proceedings, and bankruptcy.  

It is our practice to provide you the most stress-free experience possible while going over your whole financial situation and providing you ALL the options available so you can make the best choice for you and your family. 

 

 

TUTTLE LEGAL

Alexander G. Tuttle, Esquire

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