What are the main differences between Chapter 7 and Chapter 13?

If you are struggling to pay all your Kentucky bills and fear you may need to file bankruptcy in order to get out from under your crushing debt burden, you likely have many questions regarding the differences between Chapter 7 and Chapter 13, the two most frequently used forms of consumer bankruptcy. As FindLaw explains, the choice you ultimately make likely will depend on your particular situation and what you seek to accomplish by filing bankruptcy.

The first thing you need to know is that both Chapter 7 and Chapter 13 give you the protection of an automatic stay. During this period, none of your creditors can harass you for debt repayment. But other than that, Chapter 7 and Chapter 13 represent entirely different processes designed to accomplish different goals.

Chapter 7

Most people choose to file Chapter 7 bankruptcy because it is the easiest and most straightforward form of bankruptcy. In addition, if your main debt problem is excessively high credit card balances and monthly payments, Chapter 7 gives you your best chance of having these debts discharged. Finally, a Chapter 7 bankruptcy takes far less time than a Chapter 13.

However, Chapter 7 does have its downsides. For instance, you have to meet the Kentucky income guidelines in order to file Chapter 7. And if you own a home that you fear may go into foreclosure or possibly already has, Chapter 7 can forestall the foreclosure, but likely will not stop it.

Chapter 13

If you file Chapter 13 bankruptcy, you have a far better chance of saving your home from foreclosure. But keep in mind that Chapter 13 is a reorganization procedure, not a discharge procedure. What this means is that the purpose of Chapter 13 is to let you renegotiate all of your secured debts and then let you come up with a repayment plan that, once approved by the court, you must stick to for a long time, usually three or five years. By the end of that bankruptcy period, you should have all of your debt payments, including your mortgage payment, back on track.

Although you should not interpret this educational information as legal advice, it can help you understand the differences between Chapter 7 and Chapter 13 bankruptcy and why one may be better for you than the other.