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The Difference Between Chapter 7 and Chapter 13 Bankruptcy

April 19, 2018

There are few things more stressful and frightening than filing for bankruptcy. Not only will the decision have a lasting impact on your credit score, but the process itself is complex and unfamiliar.

At Kinnaird & Kinnaird, our experienced Colorado bankruptcy attorney team understands the frustration you feel. Our team will help you file paperwork, meet deadlines, and collect essential information. But first, you must decide which type of bankruptcy is best for your household.

Below, we’ll discuss the differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

When you file for Chapter 7 bankruptcy, you agree to liquidate your assets – using them to wipe out unsecured debts like credit cards and medical bills. In order to qualify, you must show little or no disposable income at the time of your filing. Next, a trustee will be appointed to administer your case. This trustee will review your papers, supporting documentation, and testimony. If everything lines up correctly, the trustee will sell your nonexempt property to pay your creditors.

If you have no property to liquidate, your creditors receive nothing. For this reason, many households with few assets choose to file for bankruptcy to get rid of unsecured debts, providing more expendable income to pay the bills.

Chapter 13 Bankruptcy

When you file for Chapter 13 bankruptcy, you agree to pay back a portion of your debts through a repayment plan. The amount you must repay will vary based on your income, expenses, and types of debt you’ve incurred over the years. There are many benefits to filing for Chapter 13 bankruptcy, including the ability to make up missed mortgage payments, the right to keep all of your property, and the opportunity to make good on your debts.

Which Should I Choose?

The major difference between filing for Chapter 7 bankruptcy and filing for Chapter 13 bankruptcy is income level. If you have few assets and little incoming money, you’ll want to file under Chapter 7. If you have enough expendable money to move forward from month to month, making partial payments on your debts, you’ll want to file under Chapter 13. However, there are several other considerations. For example, only individuals may file for Chapter 13 bankruptcy. Anyone, including businesses, may file for Chapter 7 bankruptcy.

In addition, discharge from Chapter 7 bankruptcy takes place anywhere from three to five months after filing. Discharge from Chapter 13 bankruptcy takes place when all payment plans are complete, which could take several years.

Contact an Experienced Colorado Bankruptcy Attorney for Assistance

Filing for bankruptcy may feel like defeat. But, when done correctly, it can forge the beginning of a better financial future.

If you’ve chosen to file for bankruptcy, contact an experienced Colorado bankruptcy attorney for representation and assistance by phone. Our attorneys at Kinnaird & Kinnaird will help you through this difficult process, giving you time and energy to focus on more important things – like your family, your happiness, and your well-being.