The True Difference Between 7s And 13s

by Douglas Jacobs, Esq.

April 11, 2013

2757851927_838e959e76_mChapter 7 bankruptcies fix things; Chapter 13s allow the debtor to fix things.  

There are two main types of bankruptcies for consumers, and many articles have been written here at the Bankruptcy Law Network about the differences between Chapter 7s and 13s.  You can look at posts by Susanne Robicsek, Kevin Gipson and me, to name a few.

The purpose of a Chapter 7 bankruptcy is distinctly different from a Chapter 13 bankruptcy.   7s are usually the right answer for debtors who just need a “fresh start” since all unsecured, non-priority debt is eliminated.  A Chapter 7 bankruptcy, however, does very little to affect obligations on secured debts that is be kept, like a home.

Chapter 13 bankruptcies do a lot more than 7s.  They, too, can eliminate unsecured, non-priority debt, but they can also reduce some types of secured debt.  Or change the repayment terms or the interest rate.

Most importantly, they can be used to catch up some obligations and spread out payments over five years.  Thus, for example, if you owe $6,000 in back taxes, filing a Chapter 13 will stop any garnishment or levy and allow you to pay them off at about $100 a month for 5 years.

Thus, Chapter 7 bankruptcies are often the best choice for people who just need a drastic change in their economic situation: they need to simply wake up without bills and phone calls pouring in.

Chapter 13s are for those who have the ability to get caught up on the things they need to pay (like taxes) or the things they want to keep (like their house) but need time to do it.

7s are for people who need help.  13s are for those people who need a plan so they can help themselves.

A good bankruptcy attorney can guide you through the Chapter that is right for you.

image credit:  Julia Manzerova

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.

Last modified: April 11, 2013