Chapter 7 vs Chapter 13 Bankruptcy
Careful!! There are always exceptions!
1.Length of Bankruptcy:
- Ch. 7's usually last 4 months.
- Ch. 13's last 3-5 yrs.
2. Attorney Fees:
- The court sets the fees in most cases and regulates the fees in all cases.(So, basically we all charge the same).
3. Court Appearances:
- Since Covid, almost all hearings are by Zoom or by phone (no court appearances are necessary).
4. Tax Debt:
- Ch. 7's and Ch. 13's usually discharge taxes that are over three years old.
- Additionally, in a Ch. 13, taxes can usually be paid over five years with no additional interest and no additional penalties.
5. Obtaining New Loans or Credit:
- In Ch. 7, you may continue to borrow money and purchase items on credit with no restrictions.
- In Ch. 13, you must have the trustee’s permission to borrow money or obtain new credit while you are in the bankruptcy.
6. Co-signer:
- Co-signers cannot be protected in a Ch. 7.
- Co-signers can be protected in Ch. 13.
7. Keeping Property (houses, vehicles, furniture, jewelry, etc.):
- In a Ch. 7, you usually keep any property you wish; however, at the end of the bankruptcy (usually 4 months from filing), you should be current on your payments and caught up on any arrearages (particularly on house payments and vehicle payments).
- In Ch. 13, you can usually keep any property you wish (usually at a lower interest rate, monthly payments, and balance), so long as you pay for it.
8. Surrendering Property (houses, vehicles, furniture, jewelry, etc.):
- In Ch. 7 and Ch. 13, generally, if you surrender the property, you are not required to pay for it, and you cannot be sued for it.
9. Mortgages:
- Ch. 7's never affect mortgage payments.
- Ch. 13s can help mortgage payments by catching up arrearages and can stop foreclosures.
10. Vehicles:
- Ch. 7's do not affect vehicle payments.
- Ch. 13 can lower the vehicle payments, can lower the balance on the vehicle, can reduce the interest rate on the vehicle, can catch up the arrearages on the vehicle, and if you act quickly can stop and can even recover vehicles that have already been repossessed.
11. Repossessed Vehicles:
- Ch. 7's cannot help you in recovering vehicles that have already been repossessed.
- Ch. 13's can usually recover vehicles that have already been repossessed.
12. Rental Items (houses, apartments, furniture, vehicles):
- Ch. 7's do not affect your requirement to pay rent.
- Ch. 13's do not affect your requirement to pay future rent; however, Ch. 13’s do allow you to catch up rent arrearages.
13. Furniture Payments:
- Ch. 7's do not affect furniture payments.
- Ch. 13's can lower the balance on furniture payments, lower the interest rates on furniture, and catch up arrears.
14. Loan Companies:
- Ch. 7's and Ch. 13's usually wipe out all loan companies.
15. Medical Debt:
- Ch. 7's and Ch. 13's usually eliminate all medical debt.
16. Credit Card Debt:
- Ch. 7's and Ch. 13's usually eliminate all credit card debt.
17. Past Student Loans:
- Ch. 7's do not affect student loans.
- Ch. 13's cannot wipe out student loans; however, the student loan creditors will not bother you while you are still in the bankruptcy.
18. Current Student Loans:
- You may continue to receive student loans in both chapters.
19. Garnishments:
- Ch. 7's can stop garnishments.
- Ch. 13's can stop garnishments and possibly recover some or all of the money already taken.
20. Effect on Credit Report:
- Ch. 7's and
Ch. 13's can stay on your credit for 10 years.