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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.

Full Description of Chapter 7 Bankruptcy 

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.  ​

​Full Description of Chapter 13 Bankruptcy

Differences Between Chapter 7 & Chapter 13

Chapter 7

  • Filing until discharge is usually 3-6 months 
  • All debt eliminated except for limited circumstances 
  • Does not provide for getting caught back up on mortgage or other debts
  • 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

Chapter 13

  • Filing until discharge is 3 or 5 years
  • Portion of debt repaid through bankruptcy plan
  • 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 value of non-exempt property may be used as one of the factors to determine the amount of the bankruptcy plan

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Tuttle Legal is committed to answering your questions about Bankruptcy, Foreclosure, Debt and Modification in Pennsylvania.

We offer a Free Case Evaluation and we'll gladly discuss your case with you at your convenience. Contact us today to schedule an appointment.

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