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Chapter 7 vs. Chapter 13 Which Bankruptcy option is Right for You?
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Chapter 7 vs. Chapter 13 Which Bankruptcy option is Right for You?
Chapter 7 bankruptcy is faster and more affordable than Chapter 13 bankruptcy, but it’s not the best option for everyone.
by Sean Pyles Senior Writer | Personal finance, debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet’s “Smart Money” podcast. In “Smart Money” Sean talks with Nerds on the NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on thoughtful and actionable financial advice, Sean provides real-world guidance to help people improve their financial lives. Beyond answering listeners’ money concerns on “Smart Money,” Sean also interviews guests who are not part of NerdWallet and produces special segments on topics such as the racial gap in wealth, how to start investing and the background for student loans.
Before Sean took over podcasting for NerdWallet He also covered issues concerning consumer debt. His work has been published throughout the media including USA Today, The New York Times and elsewhere. When Sean isn’t writing about personal finances, Sean can be found playing in the garden, taking walks, or walking his dog for long walks. Sean is located at Ocean Shores, Washington.
Dec 15, 2021
Written by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in capacities such as chief of the copy desk and team leader for design and editing. Her previous experience included copy editing and news for various Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor’s in mass communication and journalism in The University of Iowa.
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Bankruptcy is one of the most efficient and fastest ways to find . The majority of people who choose this option are able to file in Chapter 7 bankruptcy or Chapter 13 bankruptcy. The best option will depend on the individual’s assets as well as financial objectives.
To help you understand the difference of Chapter 7 and Chapter 13 bankruptcy, here’s a breakdown of each and the people they’re suitable for. Whatever you select, you must:
Your monthly consumer debt payments are greater than 50 percent of your monthly take-home pay.
You’re in the middle of lawsuits from creditors.
There is no way to repay your debt in five years.
What is different between Chapter 7 and Chapter 13 bankruptcy?
The most significant differences between bankruptcy vs. bankruptcy is what is considered to be eligibility, how debts are resolved , and the duration of time.
Look over this table for an overview of:
Form of bankruptcy: Liquidation.
Form of bankruptcy: Reorganization.
You must pass the means test, which looks at your income, expenses and the size of your family.
Cannot have had a previous Chapter 7 discharge in the or Chapter 13 in the past six years.
It is not possible to have filed a bankruptcy petition (Chapter 7 or 13) within the last 180 days that was dismissed for certain reasons for example, failing to attend court or follow the court’s or court.
Unsecured debt can’t exceed $419,275, and secured debt cannot exceed $1,257,850.
Regular income is required and must be current on tax filings.
It is not possible to have had an Chapter 13 filing in the past two years or Chapter 7 within the last four years.
Cannot have filed a bankruptcy petition (7 or 13) within the past 180 days that was dismissed due to certain reasons, such as failing to appear or comply with court orders.
How long does it take to obtain a discharge? It is usually less than six months.
What is the time it takes to get a discharged: Usually between three and five years, depending on the repayment plan.
Mark on credit report It remains on your credit report for after the date of the filing.
Mark on credit report The mark remains in your credit file for after the date of the filing.
One of the fastest routes to resolve overwhelming debt.
The filing of a bankruptcy petition stops legal actions and collection efforts from creditors.
Help you to resolve your debts while keeping certain assets, or avoiding getting caught up on secured debts like an automobile loan or mortgage.
The filing of a bankruptcy petition stops collection efforts and legal action from creditors.
Although rare, the trustee can sell nonexempt property.
It is generally unsecured debt that it is not protected against repossession or foreclosure.
The duration and price of the repayment plan is difficult and a lot of filers find it difficult.
Which is better? Chapter 7 instead of Chapter 13?
Which type of option is right for you depends on your financial situation and your goals.
To determine whether Chapter 7 or Chapter 13 bankruptcy is the best option choice for your situation . It is important to make sure that the debts you are struggling with can be dealt with by bankruptcy and you’re in a position get the most benefit of the fresh start that bankruptcy can provide.
Most consumers opt for Chapter 7 bankruptcy, which is quicker and cheaper than Chapter 13. Most bankruptcy filers are eligible to file Chapter 7 after taking the test, which looks at the family’s income, expenditures and size to determine the possibility of being eligible. Chapter 7 bankruptcy discharges, or wipes out, eligible debts like credit card charges medical debt, personal loans. However, other debts, such as student loans and tax owed, usually aren’t considered eligible. And Chapter 7 doesn’t offer a way to catch up on secured loan payments, like a mortgage or auto loan, and it doesn’t safeguard these assets from foreclosure or repossession.
In some instances, a bankruptcy trustee — an administrator who works in conjunction with bankruptcy courts to represent the estate of the debtor — can offer to sell nonexempt items, which means things that aren’t covered during bankruptcy. Nonexempt items differ based on state law.
Chapter 13 bankruptcy may be ideal for those who don’t be eligible for a Chapter 7 filing, for instance when their income is too high. Some who are eligible for Chapter 7 may still choose to apply to file Chapter 13 because they want to retain certain assets or get caught up on their mortgage payments. The downside is that Chapter 13 repayment plans aren’t easy: all disposable income after certain allowances must be geared towards the repayment of debt over three or five years.
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Author bios: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His work has appeared on The New York Times, USA Today and elsewhere.
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