Helbing Law Office Logo by Timothy Helbing located in Appleton, WI serving chapter 7 and chapter 13 bankruptcy

Personal bankruptcy options explained: Chapter 7 & Chapter 13

In recent posts we have talked about options to consider before bankruptcy. In some cases, it may be a good idea to try negotiating with creditors to see if that is a viable solution to your financial problems. If it doesn’t work or simply isn’t possible, bankruptcy is an option.

But once you decide to pursue bankruptcy protection, you are again faced with two main options: Chapter 7 vs. Chapter 13 bankruptcy. How can you tell which one is right for you?

First, let’s talk about Chapter 13 bankruptcy. This is more of a debt repayment plan than a debt discharge plan, and may be the best option for those who do not qualify for Chapter 7. Individuals who file Chapter 13 often reorganize outstanding debt into repayment plans that last about three to five years. After the allotted time period, some remaining debt can be discharged. With Chapter 13, your credit report will be affected for about seven years.

Chapter 7 bankruptcy may also be an option if you qualify. The discharge of unsecured debt is more immediate than with Chapter 13, but your credit report will be affected for about 10 years. There are also more stringent qualification standards with Chapter 7.

Those who wish to file Chapter 7 need to pass a “Means Test.” This is a calculation that includes a comparison of your income to the median income in Wisconsin (or the state you happen to live in). You have to meet certain income requirements and attend credit counseling.

Although you may now have a slightly better understanding of the difference between Chapter 13 and Chapter 7, you should nonetheless consult with an experienced bankruptcy attorney before making a decision on which path to pursue. The variables can be complex and broad, which is why it is a good idea to have a professional look over all the salient financial details.

Source: Michigan State University Extension, “The difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy,” LaShawn Brown, May 23, 2014

Send A Message

Fields marked with an * are required

Disclaimer: The use of the internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Share the Post:

Related Posts: