Differences Between Chapters 7 & 13?

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Chapter 7 and 13 bankruptcies are the most commonly filed cases in the United States. Whether you can file a Chapter 7 or Chapter 13 bankruptcy depends on your income, assets, debts, and your financial goals.

Chapter 7 Bankruptcy

Chapter 7 is a liquidation bankruptcy designed to wipe out your general unsecured debts such as credit cards and medical bills. You qualify for Chapter 7 bankruptcy if you are unable to pay your debts as they come due. If you make too much money, you may be required to file a Chapter 13 bankruptcy (discussed below). But most of the bankruptcy cases filed in West Virginia are Chapter 7 cases.

When you file for Chapter 7 bankruptcy, a trustee is appointed to administer your case. The Chapter 7 trustee’s job is to sell your nonexempt property to pay back your creditors. If you don’t have any nonexempt assets, your creditors receive nothing. This is the case for virtually all those that file. You can usually protect and keep everything you own in a Chapter 7 case.

(For comprehensive information on Chapter 7, visit our Chapter 7 Bankruptcy topic area.)

Chapter 13 Bankruptcy

Chapter 13 is a reorganization bankruptcy designed for debtors with regular income who can pay back at least a portion of their debts through a repayment plan. If you make too much money to qualify for Chapter 7 bankruptcy, a Chapter 13 case can still provide you substantial relief. Many debtors also choose to file for Chapter 13 bankruptcy because it offers many benefits that Chapter 7 bankruptcy does not (such as the ability to catch up on missed mortgage payments or strip wholly unsecured second mortgages from your house).

In Chapter 13 bankruptcy, you get to keep all of your property (including nonexempt assets). In exchange, you pay back all or a portion of your debts through a repayment plan. The amount you must pay back depends on your income, expenses, and types of debt. Typically, Chapter 13 bankruptcy is for debtors who can afford to make monthly payments to get caught up on missed mortgage or car payments or pay off nondischargeable debts such as alimony or child support arrearages.