What is the difference between Chapter 7 and Chapter 13?

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There are two basic types of bankruptcy available to most people, and these are found in Chapter 7 and Chapter 13 of the United States Bankruptcy Code.

A Brief Description of Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 is used to wipe out or discharge certain types of bills, like credit card debts, medical bills, and other unsecured debts.  Unsecured debts are bills where there was no collateral pledged to guaranty payment.  As bankruptcy attorneys, we use Chapter 7 to wipe out most unsecured debts to give you a fresh start.

Not all debts can be discharged, however.  For example, if you borrowed money to buy a house, a car, or other property, and you consented to a lien on those items, you must pay off the loan if you want to keep those items.  These are called secured debts.  You cannot wipe out a consensual lien unless you pay the debt.  But, if the house is in foreclosure or if the car was repossessed, or, if you do not want those items anymore, you can file a Chapter 7 and surrender the collateral back to the creditor and wipe out the debt.

Chapter 7 will not discharge a criminal fine, child support, some taxes or most student loans.  If you need help paying bills that cannot be discharged in Chapter 7, we use Chapter 13 to consolidate your bills into a debt repayment plan that is supervised by the United States Bankruptcy Court.  Often, we can force your creditors to accept much lower and affordable payments.

In Chapter 13 we can get back a repossessed car before the car is sold, and we can stop a house foreclosure before it goes to judicial sale.

So, if you have bills that have to be paid back, like a mortgage, or a car title loan, furniture loan, back child support, criminal fine, student loans, or taxes, we can consolidate those debts into an affordable payment for you by filing Chapter 13.

You must have a regular source of income to file a Chapter 13, because you will be making a monthly payment to the Court’s Trustee to pay on these claims.  Often, we can save you thousands of dollars because you do not have to pay your bills back in full in every case, and in many cases, we can pay types of claims for pennies on the dollar, and without paying interest.  This usually saves more than the cost of your attorney fees.  We can also reduce high interest car and furniture loans down to a fair interest rate of 1 or 2 per cent over prime.

Sometimes people have both secured and unsecured debts that fit into either chapter.  We use a thorough Intake procedure to analyze your financial situation to determine which chapter works best for you and your family.

When you just need some time to catch your breath either type of bankruptcy can stop debt collector harassment, stop garnishment, stop repossession, stop lawsuits, stop utility shut off, stop license suspension and stop foreclosure.

If you need to pay Child Support Arrearages, Taxes, Student Loans, Fines, Home Mortgage Arrearages and Car Loans you should consider making reasonable monthly payments through Chapter 13 Monthly.

Both types of bankruptcy can eliminate Medical Bills and most Credit Card Debt.

How much money do I need to file?

The Court filing fee for Chapter 7 is $335.

The Court filing fee for a Chapter 13 case is only $310.    [Note: from time to time the Court may increase the filing fees.  Ask for the current amount.]

Attorney fees vary by location and are based on the complexity of your case.  For more detailed information contact a local attorney of your choice.