There are many debt settlement options available and when considering the differences between Chapter 7 and Chapter 13, it is important to review the size and scope of your debts. To determine if one qualifies for Chapter 7 bankruptcy, a borrower must undergo a means test and complete a pre-filing credit counseling session. For Chapter 13, one’s unsecured assets must be below $360,476 and their secured assets must be less than $1,081,400.
Who qualifies for Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is for individuals with little to no assets. His or her money is tied up in meeting the basic necessities of life, like having a place to sleep, small household items like furniture, paying other smaller bills, and groceries.
Essentially, to qualify for Chapter 7, you must have very little discretionary spending cash at the end of each month.
The advantages of a Chapter 7 mortgage allow one to be released of unsecured debt obligations. You can expect the process to be finalized within a few months. It is not typically a long legal process. Lastly, bill collectors cannot contact you once Chapter 7 proceedings are in motion.
Who qualifies for Chapter 13 Bankruptcy?
Chapter 13 is for much larger, unpaid debt obligations. Typically people filing for Chapter 13 bankruptcy have a substantial amount of equity invested in a home, and they are able to pay larger monthly expenses. It is the large, monthly expenses, like a mortgage, that qualify them for Chapter 13 if they cannot pay on time.
A significant advantage of Chapter 13 is the ability to pay off large, substantial debts across a period of several years and keep your property. Once the terms of the Chapter 13 settlement are reached, the borrower will make one monthly payment on all his or her loans to a bankruptcy trustee every month.