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Filing For Bankruptcy: Choosing Chapter 7 or Chapter 13


A debtor may have the option to choose for Chapter 7 or Chapter 13 bankruptcy. In the case of Ch.13, the debt is organized into a practical payment plan; whereas with Ch. 7, any debt legally capable of expungement is resolved. Both options have different advantages, disadvantages, and requirements. To learn more, you can talk with a skilled bankruptcy lawyer from Smith & Weer, P.C.


The Differences Between Ch. 7 and Ch. 13 Bankruptcy


Depending on what financial situation you are in, one form of bankruptcy may be more preferable than the other. For example Ch. 13 might be ideal if you are behind on mortgage payments and would like to retain your property. On the other hand if you have copious amounts of medical and credit card debt, and no way to pay it off, Ch. 7 could be right for you. A vast majority of residents in [state] who want to file for bankruptcy will choose Ch. 7 because it has the ability to eliminate the burden of heavy debt.


Advantages of Filing for Chapter 7 Bankruptcy

  • You get a fresh start.
  • The only debts you may still owe will be secured debts such as student or government loans and taxes.
  • You will gain protection from creditors and collection agencies.
  • Your wages will not typically be garnished.
  • Any wages or property you earn after you file for bankruptcy will be yours.
  • There is no minimum amount of debt required to file for Ch. 7.
  • It usually takes between 3 and 6 months to discharge your debt.


Disadvantages of Filing for Chapter 7 Bankruptcy


  • You will lose non-exempt property.
  • You may still be forced to foreclose on a home
  • Any co-signer of a loan might be stuck with your debt.
  • Filing for Chapter 7 can only be done every six years.


Advantages of Filing for Chapter 13 Bankruptcy


  • Ch. 13 implements a payment plan based on your disposable income.
  • You may be able to keep any exempt and non-exempt property.
  • Debts cannot be eliminated, but they can be reduced.
  • You are protected from any collection efforts by agencies or creditors.
  • Your wages will generally not be garnishable.
  • Many debts are dischargeable (i.e. luxury items over a certain value)
  • Co-signers may be immune from collections.
  • If you meet the terms of the payment plan, you may not risk foreclosure.
  • You can be given more time to pay off your debts.
  • Chapter 13 can be filed at anytime.
  • You can file for Ch.13 repeatedly.
  • Creditors can be separated by class.


Disadvantages of Filing for Chapter 7 Bankruptcy


  • Your payment plan is based on disposable income which could tie up any extra money you have until you payoff your debt.
  • The process is complex and often more expensive.
  • Your debt should be under $1 million.
  • Your payment plan may last between 3 and 5 years.
  • The bankruptcy court will be involved for the duration of your payments.
  • Stockbrokers are typically not eligible for Ch. 13.


Contactin Smith & Weer, P.C. For Bankruptcy Advice


Whether you are unsure about filing for bankruptcy or don’t know which option is right for you, a chapter 13 lawyer Pekin IL relies on can help. To learn more, please call us today.

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