Most people wonder what the difference is between these two chapters of the bankruptcy code.
Some people think that in a Chapter 13 they repay their creditors all they owe.
Whereas other people think that in a Chapter 7, they lose all or most of their possessions.
To what extent are these ideas correct? To begin with, the required paperwork filed with the court is the same between these two chapters.
However, there is a whole lot more additional paperwork and court hearings required in a Chapter 13 versus a Chapter 7.
So if you don't like to go to court more than once, then you should try hard to avoid a Chapter 13 bankruptcy.
OK, so a Chapter 13 is a bankruptcy case wherein the debtor repays his creditors.
There is a debt limit in effect.
In other words, say a debtor owed $600,000 or more.
In that situation, and everything else being equal, his case might actually be filed as a Chapter 11.
That is simply because in a Chapter 11, there is no debt limit.
So in both a Chapter 11 and a Chapter 13, the debtor repays his creditors.
In both of these Chapters, there is no minimum amount that the debtor has to repay his creditors.
So contrary to what you may have heard, you as a potential debtor are not necessarily expected to repay your creditors 100%.
The determination of how much any creditor will be repaid is based on primarily two things.
One; how much disposable income the debtor has per the filed bankruptcy schedules (Schedules I, J, and the Means Test).
Two; what class is the creditor in.
Creditor classes are secured; unsecured priority; and unsecured non-priority.
Repayment priority goes from secured down to unsecured non-priority.
Another option that is available in bankruptcy is to convert from one chapter to another.
Conversion is bankruptcy terminology for changing from say a Chapter 7 to a Chapter 13.
Or vice versa, it really does not matter.
Why consider a Chapter 7 versus a Chapter 13? If your income level is such that you qualify for a Chapter 7, then it is in the your best interest to file a Chapter 7.
For in a Chapter 7 bankruptcy, the unsecured, non-priority debts are discharged.
Discharged simply means there is no longer any legal reason why such debts have to be repaid by the debtor.
Sometimes the debtor does not qualify for a Chapter 7 because of his income level.
He could still file a Chapter 13 though and at least get the benefit of the protection via the bankruptcy automatic stay.
That way no debtor can harass or take legal action against the debtor to try to recover money or other property from him while the case is ongoing and the automatic stay is in effect.
If our hypothetical debtor above did file a Chapter 13 bankruptcy, it is always possible for him to convert later on to a Chapter 7.
Presuming of course at that later stage in time the debtor qualified on his income for a Chapter 7 bankruptcy.
So that is the scoop on a Chapter 7 versus a Chapter 13 bankruptcy.
Some people think that in a Chapter 13 they repay their creditors all they owe.
Whereas other people think that in a Chapter 7, they lose all or most of their possessions.
To what extent are these ideas correct? To begin with, the required paperwork filed with the court is the same between these two chapters.
However, there is a whole lot more additional paperwork and court hearings required in a Chapter 13 versus a Chapter 7.
So if you don't like to go to court more than once, then you should try hard to avoid a Chapter 13 bankruptcy.
OK, so a Chapter 13 is a bankruptcy case wherein the debtor repays his creditors.
There is a debt limit in effect.
In other words, say a debtor owed $600,000 or more.
In that situation, and everything else being equal, his case might actually be filed as a Chapter 11.
That is simply because in a Chapter 11, there is no debt limit.
So in both a Chapter 11 and a Chapter 13, the debtor repays his creditors.
In both of these Chapters, there is no minimum amount that the debtor has to repay his creditors.
So contrary to what you may have heard, you as a potential debtor are not necessarily expected to repay your creditors 100%.
The determination of how much any creditor will be repaid is based on primarily two things.
One; how much disposable income the debtor has per the filed bankruptcy schedules (Schedules I, J, and the Means Test).
Two; what class is the creditor in.
Creditor classes are secured; unsecured priority; and unsecured non-priority.
Repayment priority goes from secured down to unsecured non-priority.
Another option that is available in bankruptcy is to convert from one chapter to another.
Conversion is bankruptcy terminology for changing from say a Chapter 7 to a Chapter 13.
Or vice versa, it really does not matter.
Why consider a Chapter 7 versus a Chapter 13? If your income level is such that you qualify for a Chapter 7, then it is in the your best interest to file a Chapter 7.
For in a Chapter 7 bankruptcy, the unsecured, non-priority debts are discharged.
Discharged simply means there is no longer any legal reason why such debts have to be repaid by the debtor.
Sometimes the debtor does not qualify for a Chapter 7 because of his income level.
He could still file a Chapter 13 though and at least get the benefit of the protection via the bankruptcy automatic stay.
That way no debtor can harass or take legal action against the debtor to try to recover money or other property from him while the case is ongoing and the automatic stay is in effect.
If our hypothetical debtor above did file a Chapter 13 bankruptcy, it is always possible for him to convert later on to a Chapter 7.
Presuming of course at that later stage in time the debtor qualified on his income for a Chapter 7 bankruptcy.
So that is the scoop on a Chapter 7 versus a Chapter 13 bankruptcy.
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