What is the difference between Chapter 13 and Chapter 7 bankruptcy?

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There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. As of 2000, the fees for seeking bankruptcy relief are $160: a filing fee of $130 and an administrative fee of $30.

Attorney fees are additional Chapter 13 allows persons with a steady income to keep property, like a mortgaged house or a car, that they otherwise might lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off a default during a three-to-five-year period, rather than surrender any property. After you have made all payments under the plan, you receive a discharge of your debts Known as straight bankruptcy, Chapter 7 involves liquidation of all assets that are not exempt.

Exempt property may include automobiles, work-related tools and basic household furnishings. Some of your property may be sold by a court-appointed official ï¿½ a trustee ï¿½ or turned over to your creditors. You can receive a discharge of your debts through Chapter 7 only once every six years Answer The best books on self-filing are at nolo.com/lawstore/books/index.cfm/subcatID/575C3BE9-F0C1-448E-B5F43D22FE36E9F2" rel="nofollow">nolo.com/lawstore/books/index.cfm/subcat... If that doesn't format properly, just go to nolo.com You can and should do the research on filing your own Chapter 7 before the present congress steals it out from under you.

These books are also available at most public libraries, and Chapter 7 courts are very friendly to self-filed cases...for now Answer The filing fee for Chapter 7 is now $209, and the filing fee for Chapter 13 is $194 (as of today's date, 4/4/05) The most striking difference is that a Chapter 7 lasts about 3 1/2 months, during which time you make no payments to the Court (and to qualify for Chapter 7 you must show that you have no money left over each month to make payments), whereas a Chapter 13 lasts from 3 to 5 years, and during that time you make monthly payments to the Court (because you have more income than expenses). This simplistic explanation makes it sound like everyone would want to file Chapter 7 instead of Chapter 13, but this isn't true; Chapter 13 has several complex advantages over Chapter 7, such as you can structure your Chapter 13 to let you keep property that the Court would sell in a Chapter 7, and you can get rid of certain types of debts that cannot be discharged by a Chapter 7, to name a couple. But, as of today's date (4/4/05), the U.S.House of Representatives is considering new bankruptcy reform legislation (already passed in the Senate), which if they pass it, will go to the President for approval.

If it ultimately becomes law, the differences between Chapter 7 and Chapter 13 will change. Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person Answer A chapter 7 is total liquidation of nonexempt assets. A Chapter 13 is a "debt consolidation", in which the debtor does not relinquish any property but is required to make a specified monthly payment to the trustee.

The trustee will then pay the creditors according to priority. A 13 is generally 3-5 years. The basic rule is the creditors must receive a like amount as they would have if the debtor filed a 7.

Secured and unsecured debts are treated differently in each bankruptcy Answer The short version, a chapter seven is a full liquidation bankruptcy in which the petitioner relinquishes all nonexempt property to be sold to pay creditors. This generally does not include the primary residence and one vehicle, it depends on individual circumstances. A chapter 13 is a consolidation bankruptcy in which the petitioner agrees to a payment plan which will be overseen by the assigned trustee.

The petitioner keeps all their property but must repay within 3-5 years at least the same amount the creditors would have received under a chapter 7 Chapter 7 bankruptcy is essentially a liquidation. In a Chapter 7, your assets may be recovered to pay off some of your debt (car, furniture, home, etc, depending on state laws) A Chapter 13 bankruptcy is a consolidation. The court decides how much you can afford to pay back and you will be set up on a payment plan for several years (up to 5, I believe).

The con of a Chapter 13 bankruptcy is that it is a long process. The pro is that you get to retain all of your assets A Chapter 7 is a total liquidation. If you are qualified, depending on your assets and your state's exemptions, it may be potential to wipe out your unsecured debts (credit cards, medical bills, etc.) with little or no other troubles.

If you have secured debts (mortgage, car payments, etc. ) you would either have to agree to continue to pay these or allow the lenders to retake the collateral. Current law requires an income Means Test, whereby your total household income is determined, and then compared to the median for your state and household size. If you fall at or below the median you can file Chapter 7, if not you can only file Chapter 13.

Chapter 13 is a repayment plan. If your income is below the median, you can file a 3 year plan - all your income except for acceptable deductions for living expenses goes int the Chapter 13 plan which goes to your creditrs. If the court has confirmed the plan, the creditors must accept that, even if they get much less than full payment.

At the end of the plan, your unsecured debts are discharged If you are above the median income test, you can only suggest a 5 year plan Chapter 7 will do not anything to save your home from foreclosure by a first mortgage holder. A Chapter 13 plan can stop foreclosure Chapter 7 is a complete debt wipe-out. All debts that are eligible under bankruptcy laws (Child support & student loans are some debts that BK CANNOT wipe out) are wiped out and you will no longer be obligated to pay anything back A Chapter 13 is not a complete debt wipe-out.

You negotiate with each creditor to change the terms of the debt so you can repay them (i.e. Cancel all interest, settle for a percentage of the principal balance, etc. ). One you have established your repayment plan to each debtor, the BK will not be discharged until you pay back what you agrees to.In other words, you will still have to pay back each creditor, but not the full amount due.

In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection (see below), sell it, and distribute the proceeds to your creditors. For more information on Chapter 7, see A Chapter 7 Bankruptcy Overview .

In Chapter 13 bankruptcy, you file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time. The amount you'll have to repay depends on how much you earn, the amount and types of debt you owe, and how much property you own. For more information about Chapter 13, see An Overview of Chapter 13 Bankruptcy.

You lose no property in Chapter 13 bankruptcy, because you fund your repayment plan through your income. In Chapter 7 bankruptcy, you select property you are eligible to keep from a list of state exemptions. Although state exemption laws differ, states typically allow you to keep these types of property in a Chapter 7 bankruptcy:Equity in your home, called a homestead exemption.

Under the Bankruptcy Code, you can exempt up to $20,200 of equity. Some states have no homestead exemption; others allow debtors to protect all or most of the equity in their home. (To learn more, see Nolo's article Your Home in Chapter 7 Bankruptcy.)Insurance.

You usually get to keep the cash value of your policies. Most retirement benefits are protected in bankruptcy. (To learn more, see Nolo's article Your Retirement Plan in Bankruptcy.)Personal property.

You'll be able to keep most household goods, furniture, furnishings, clothing (other than furs), appliances, books and musical instruments. You may be able to keep jewelry only worth up to $1,000 or so.

Ul>There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. As of 2000, the fees for seeking bankruptcy relief are $160: a filing fee of $130 and an administrative fee of $30.

Attorney fees are additional. Chapter 13 allows persons with a steady income to keep property, like a mortgaged house or a car, that they otherwise might lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off a default during a three-to-five-year period, rather than surrender any property.

After you have made all payments under the plan, you receive a discharge of your debts. Known as straight bankruptcy, Chapter 7 involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools and basic household furnishings.

Some of your property may be sold by a court-appointed official? A trustee? Or turned over to your creditors.

You can receive a discharge of your debts through Chapter 7 only once every six years. The best books on self-filing are listed under the related links. You can and should do the research on filing your own Chapter 7 before the present congress steals it out from under you.

These books are also available at most public libraries, and Chapter 7 courts are very friendly to self-filed cases...for now. The filing fee for Chapter 7 is now $209, and the filing fee for Chapter 13 is $194 (as of today's date, 4/4/05). The most striking difference is that a Chapter 7 lasts about 3 1/2 months, during which time you make no payments to the Court (and to qualify for Chapter 7 you must show that you have no money left over each month to make payments), whereas a Chapter 13 lasts from 3 to 5 years, and during that time you make monthly payments to the Court (because you have more income than expenses).

This simplistic explanation makes it sound like everyone would want to file Chapter 7 instead of Chapter 13, but this isn't true; Chapter 13 has several complex advantages over Chapter 7, such as you can structure your Chapter 13 to let you keep property that the Court would sell in a Chapter 7, and you can get rid of certain types of debts that cannot be discharged by a Chapter 7, to name a couple. But, as of today's date (4/4/05), the U.S. House of Representatives is considering new bankruptcy reform legislation (already passed in the Senate), which if they pass it, will go to the President for approval. If it ultimately becomes law, the differences between Chapter 7 and Chapter 13 will change.

Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person. A chapter 7 is total liquidation of nonexempt assets. A Chapter 13 is a "debt consolidation", in which the debtor does not relinquish any property but is required to make a specified monthly payment to the trustee.

The trustee will then pay the creditors according to priority. A 13 is generally 3-5 years. The basic rule is the creditors must receive a like amount as they would have if the debtor filed a 7.

Secured and unsecured debts are treated differently in each bankruptcy. The short version, a chapter seven is a full liquidation bankruptcy in which the petitioner relinquishes all nonexempt property to be sold to pay creditors. This generally does not include the primary residence and one vehicle, it depends on individual circumstances.

A chapter 13 is a consolidation bankruptcy in which the petitioner agrees to a payment plan which will be overseen by the assigned trustee. The petitioner keeps all their property but must repay within 3-5 years at least the same amount the creditors would have received under a chapter 7. Chapter 7 bankruptcy is essentially a liquidation.

In a Chapter 7, your assets may be recovered to pay off some of your debt (car, furniture, home, etc, depending on state laws) A Chapter 13 bankruptcy is a consolidation. The court decides how much you can afford to pay back and you will be set up on a payment plan for several years (up to 5, I believe). The con of a Chapter 13 bankruptcy is that it is a long process.

The pro is that you get to retain all of your assets. A Chapter 7 is a total liquidation. If you are qualified, depending on your assets and your state's exemptions, it may be potential to wipe out your unsecured debts (credit cards, medical bills, etc.) with little or no other troubles.

If you have secured debts (mortgage, car payments, etc.) you would either have to agree to continue to pay these or allow the lenders to retake the collateral. Current law requires an income Means Test, whereby your total household income is determined, and then compared to the median for your state and household size. If you fall at or below the median you can file Chapter 7, if not you can only file Chapter 13.

Chapter 13 is a repayment plan. If your income is below the median, you can file a 3 year plan - all your income except for acceptable deductions for living expenses goes int the Chapter 13 plan which goes to your creditors. If the court has confirmed the plan, the creditors must accept that, even if they get much less than full payment.

At the end of the plan, your unsecured debts are discharged. If you are above the median income test, you can only suggest a 5 year plan. Chapter 7 will do not anything to save your home from foreclosure by a first mortgage holder.

A Chapter 13 plan can stop foreclosure. Chapter 7 is a complete debt wipe-out. All debts that are eligible under bankruptcy laws (Child support & student loans are some debts that BK CANNOT wipe out) are wiped out and you will no longer be obligated to pay anything back.

A Chapter 13 is not a complete debt wipe-out. You negotiate with each creditor to change the terms of the debt so you can repay them (i.e. Cancel all interest, settle for a percentage of the principal balance, etc.).

One you have established your repayment plan to each debtor, the BK will not be discharged until you pay back what you agrees to. In other words, you will still have to pay back each creditor, but not the full amount due.