Which Is Better Chapter 7 Or Chapter 13 Bankruptcy ?
Most people in debt prefer filing for Chapter 7, as it gets rid of most of the unsecured debts. But every debtor does not qualify for Chapter 7. In few cases, repaying debt partly over time may be court-approved. Chapter 13 repayment method has benefits that are generally not available in Chapter 7. |
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Under the latest bankruptcy law, the debtor must qualify under "means test" to file Chapter 7. If the debtor's average income for 6 months is equal or less than the median income in the state, then only he is eligible for Chapter 7. In case of Chapter 13, the debtor needs to make monthly payments to bankruptcy trustee for a period of 3 to 5 years. Later, it is distributed to the creditors. In majority of cases, filing up Chapter 13 will stop foreclosure and the court confirms debtor’s repayment plan.
In Chapter 7, the debtor cannot keep his assets or home if they on mortgaged for payments. A debtor usually can keep nonexempt properties under Chapter 13. But in Chapter 7, the trustee will sell off debtor's property that is not exempt and pay the creditors. Some debts such as student loans and some tax debts usually survive both Chapter 7 and Chapter 13 bankruptcies. Chapter 13 will usually protect co-debtor, from liability generally for a joint debt, and the creditors receive their payments via a repayment plan. If the debt remains even after the plan comes to an end, creditors can get their monies from the co-debtor. Chapter 7 will always eliminate the debtor’s personal liability for debt. The co-debtor will still remain responsible for payment. But still people prefer Chapter 7 over Chapter 13 because it is quick and easy.
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Chapter 7 is otherwise known as the ‘straight bankruptcy’ or ‘liquidation’. It is truly the quickest and the simplest of all kinds of bankruptcies. This one is made available to the individuals, married couples, partnerships, and corporations. Under this Chapter, a trustee gets appointed by the court that is liable to gather as well as sell the non exempt property.