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Chapter 7 vs. Chapter 13: Which Bankruptcy Choice is Best for You?
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Chapter 7 vs. Chapter 13: Which Bankruptcy Option Is Best for You?
Chapter 7 bankruptcy is faster and less expensive in comparison to Chapter 13 bankruptcy, but it’s not the most suitable option for everyone.
Written by Sean Pyles Senior Writer | Personal finances, financial debt Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet’s “Smart Money” podcast. The show “Smart Money” Sean talks with Nerds from the NerdWallet Content team to answer the listeners’ questions about personal finance. With a focus on shrewd and actionable money advice, Sean provides real-world guidance that can help consumers better the financial situation of their lives. Beyond answering listeners’ money concerns on “Smart Money,” Sean also interviews guests outside of NerdWallet and produces special segments on topics like the racial wealth gap and how to begin investing and the background for student loans.
Before Sean lead podcasting for NerdWallet, he covered topics that dealt with consumer debt. His writing has been featured on USA Today, The New York Times and elsewhere. When when he’s not writing about personal finance, Sean can be found working in the garden, taking walks, or taking his dog for long walks. He is based at Ocean Shores, Washington.
Dec 15, 2021
Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring debt and money management Kathy Hinson leads the core personal finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years at The Oregonian in Portland in capacities such as chief of the copy desk and team director of design and editing. Previous experience included copy and news editing for a variety of 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 fastest and most effective ways to find . Most consumers who follow this route will file to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Which is best depends on the person’s assets and financial objectives.
To help you understand the difference in Chapter 7 and Chapter 13 bankruptcy This article will explain the differences between each type and whom they’re suitable for. Regardless of which you might decide to go with, it’s best if:
Your monthly payments to your consumer debt exceed 50% of your monthly take-home earnings.
You’re being sued by creditors.
There’s no way you can pay off your debt within five years.
What is what’s the distinction in Chapter 7 and Chapter 13 bankruptcy?
The major differences between vs. bankruptcy are those of eligibility criteria, the method by which debts are settled and the length of time.
Check out this table to get an understanding at a glance:
Form of bankruptcy liquidation.
Reorganization of the bankruptcy process: Form of bankruptcy.
You have to pass the means test, which looks at your earnings, expenses and family size.
Cannot have had a previous Chapter 7 discharge in the or a Chapter 13 in the past six years.
Cannot have filed a bankruptcy petition (Chapter 7, 13) within the last 180 days. The petition was rejected due to certain circumstances, such as failing to appear in court or follow court order.
Unsecured debt cannot exceed $419,275 and secured debt can’t exceed $1,257,850.
You must earn a regular income and have current tax returns.
It is not possible to have had an Chapter 13 filing in the past two years or Chapter 7 in the past four years.
You cannot have filed a bankruptcy petition (7 or 13) within the past 180 days. The petition was dismissed for a variety of reasons, for example, failure to appear or not complying with court orders.
How long it takes to get a discharged: Usually under six months.
What is the time it takes to obtain a discharge? Usually three to five years, based on the repayment program.
The credit report’s mark: Remains in your credit file for from filing date.
Mark on credit report: Remains on your credit report for the time period from the date of filing.
A quick methods to settle debts that are overwhelming.
A bankruptcy petition can stop legal actions and collection efforts from creditors.
It can help you settle your debts while retaining certain assets and not falling behind on secured debts, such as an automobile loan or mortgage.
The filing of a bankruptcy petition stops collection efforts and legal action by creditors.
Though rare, the trustee is able to sell property that is not exempt.
Generally for unsecured debt; it is not protected from foreclosure or repossession.
The length and cost that comes with the payment plan can be difficult for many filers.
Which is better? chapter 7 or Chapter 13?
The best option for you depends on your situation financially and goals.
To decide if Chapter 7 or Chapter 13 bankruptcy is best choice for your situation . You’ll need to be sure your problem debts can be dealt with through bankruptcy and you’re able to benefit from the fresh start that bankruptcy provides.
The majority of consumers choose Chapter 7 bankruptcy, which is more efficient and less expensive in comparison to Chapter 13. The vast majority of people who file for bankruptcy qualify in Chapter 7 after taking the test, which looks at the household’s finances, income and size to determine eligibility. Chapter 7 bankruptcy discharges, or wipes out, eligible debts like credit card charges as well as medical debts and personal loans. But other debts, like student loans and tax debts, generally aren’t qualified. Also, Chapter 7 doesn’t offer a route to get caught up on secured loan payments, like an auto or mortgage loan but it does not safeguard these assets from foreclosure or repossession.
In certain instances bankruptcy trustees -an administrator who collaborates with the bankruptcy courts to manage the estate of the debtor — can offer to sell nonexempt items, which means items that aren’t protected during bankruptcy. Nonexempt items are defined according to the law of the state.
Chapter 13 bankruptcy may be better for those who don’t meet the requirements for a Chapter 7 filing, for instance when their income is excessive. Some who are eligible to file for Chapter 7 may still choose to choose to file for Chapter 13 because they want to retain certain assets or get caught behind on mortgage payments. However, Chapter 13 repayment plans are challenging: All disposable income after certain allowances has to be directed toward repaying 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 writing has appeared on The New York Times, USA Today and elsewhere.
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