Filing for bankruptcy is an important decision that should not be taken lightly, and a very important part of filing is deciding which type of bankruptcy is best for your situation. The two most common types of bankruptcy are Chapter 7 and Chapter 13, both of which work in slightly different ways. To help you decide which type of bankruptcy may be best for you, Groce & DeArmon is here today to talk about the differences between Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a type of liquidation bankruptcy that is meant to leave you with a “clean slate.” People who file for Chapter 7 bankruptcy typically need a fresh start and have little to no debts. In this case, the court will appoint an attorney to oversee the case which will be discharged within a short period of time.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is also known as the Wage Earner’s plan. This type of bankruptcy typically allows debtors who have a consistent income to keep their home and other assets and allows them to make payments over a period of 3 to 5 years.
The Automatic Stay
Whether you file for Chapter 7 or Chapter 13 bankruptcy, the automatic stay will go into effect. This motion stops any creditors from collecting debts against you for a certain period of time. The difference is that in Chapter 7 bankruptcy, the automatic stay will only last up to about three months; in Chapter 13 bankruptcy the automatic stay can potentially last for years.
Chapter 7 bankruptcy will typically last only three to four months before the case is discharged. This means that debtors can get back on their feet faster than if they filed for Chapter 13. In Chapter 13, the case is typically not discharged until all payments have been made with the help of a payment plan. This can last anywhere from 3 to 5 years.
In order to file for either type of bankruptcy, you must meet eligibility requirements. For Chapter 7 bankruptcy, you must pass the Chapter 7 means test which determines if your income is less than the median income in the state of Missouri. If it is greater than the median, you may file for Chapter 13. For Chapter 13 bankruptcy, debtors may not have more than a specific amount of debt to file.
What Happens to Property
In Chapter 7 bankruptcy, all of the debtor’s nonexempt property may be sold in order to pay back creditors. On the other hand, in Chapter 13 debtors can keep all of their property but must pay back their creditors an amount equal to the value of their nonexempt assets.
Filing for Bankruptcy With Groce & Dearmon
While these are only some of the differences between Chapter 7 and Chapter 13 bankruptcy, it is important to fully understand the process before taking on a bankruptcy case with an experienced attorney. At Groce & DeArmon, our bankruptcy attorney has over 30 years of experience with both Chapter 7 and Chapter 13 cases in Springfield, MO. To get started, schedule a free consultation or call us at 417-862-3706 for more information.