Chapter 13 v. Chapter 7: Which is Best?

When considering filing for bankruptcy, it can be confusing to decide which type of bankruptcy filing is best for you. Individual circumstances vary greatly, and consulting the aid of a professional bankruptcy attorney is always the best option. That being said, here are some of the basic differences between Chapter 13 and Chapter 7 bankruptcies. Either may help to get you started on your road to recovery.

Chapter 13 Bankruptcy: Wage Earner’s Plan

A Chapter 13 bankruptcy is an option for the restructuring of debts and the creation of a repayment plan suitable to the filer and the creditors. Usually the payments are structured over a period of three to five years. The biggest difference between this option and a Chapter 7 bankruptcy is that a Chapter 13 bankruptcy does not require you to liquidate assets; in other words, you generally get to keep assets like your home and your automobile.

This is called the “wage earner’s plan” because it does not eliminate or discharge debts. Rather, it consolidates debts into monthly payments based on the filer’s income; generally these payments will be a reduced form of the total amount owed. In order to qualify for Chapter 13, an individual’s unsecured debts must be less than $360,475 and secured debts must be less than $1,081,400. In order to successfully apply, the debtor must be able to certify that they have received credit counseling from an approved agency. A bankruptcy attorney will help guide you through this process and help you determine if Chapter 13 filing is the right step for you.