{"id":4910,"date":"2021-12-09T09:00:19","date_gmt":"2021-12-09T14:00:19","guid":{"rendered":"https:\/\/westbrooklawgroup.com\/?p=4910"},"modified":"2022-01-07T20:54:15","modified_gmt":"2022-01-08T01:54:15","slug":"chapter-7-vs-13-bankruptcy-compared","status":"publish","type":"post","link":"https:\/\/westbrooklawgroup.com\/2021\/12\/09\/chapter-7-vs-13-bankruptcy-compared\/","title":{"rendered":"Chapter 7 vs 13 Bankruptcy Compared"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Are you thinking of filing for bankruptcy? You&#8217;ve read that there are two types: Chapter 7 and Chapter 13. Is one better than the other, and should you go with one or the other? What is the difference between these two types of bankruptcy? Will you qualify for Chapter 7 or 13 bankruptcy? Which documents do you need to <strong><a href=\"\/2016\/05\/14\/can-lose-job-filing-bankruptcy\/\">file for certain types of bankruptcy<\/a><\/strong>? A reliable <\/span><strong><a href=\"https:\/\/westbrooklawgroup.com\/\">bankruptcy law firm<\/a><\/strong><span style=\"font-weight: 400;\"> in St. Charles can answer these questions and more.\u00a0 At Westbrook Law Group, our competent bankruptcy attorneys can help you make the right choice.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Chapter 7 Bankruptcy Overview<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Unlike chapter 13, a chapter 7 bankruptcy does not need a repayment plan. Instead, the <strong><a href=\"\/2016\/08\/29\/is-my-bankruptcy-a-no-asset-bankruptcy\/\">bankruptcy trustee collects and sells the debtor&#8217;s non-exempt assets<\/a>,<\/strong> using the profits to pay creditors as required by the Bankruptcy Code.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Part of the debtor&#8217;s property may be encumbered by liens and mortgages to other creditors. The Bankruptcy Code also enables to <strong><a href=\"\/2013\/05\/21\/missouri-bankruptcy-exemptions\/\">retain some &#8220;exempt&#8221; assets<\/a><\/strong>, but a trustee will liquidate the rest. As a consequence, prospective debtors should be aware that filing under <a href=\"https:\/\/westbrooklawgroup.com\/chapter-7\/\"><strong>Chapter 7<\/strong><\/a><\/span><span style=\"font-weight: 400;\">\u00a0may result in property loss.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Chapter 13 Bankruptcy Overview<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">In Chapter 13 bankruptcy, debtors reorganize their finances under the supervision and consent of the courts. Personal bankruptcy is available to individuals and married couples who are self-employed or run an unincorporated company.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Difficulty repaying creditors within three to five years is part of a <\/span><strong><a href=\"https:\/\/westbrooklawgroup.com\/chapter-13\/\">Chapter 13 <\/a><\/strong><span style=\"font-weight: 400;\">restructuring, sometimes called a wage earner&#8217;s plan.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In most cases, the repayment plan must pay creditors a sum comparable to other kinds of bankruptcy, and it may consume all of the debtor&#8217;s disposable income if necessary.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Chapter 7 Pros &amp; Cons<\/b><\/h2>\n<p>&nbsp;<\/p>\n<h3><em><strong>Pros of Chapter 7<\/strong><\/em><\/h3>\n<ul>\n<li><b>Cheapest<\/b><span style=\"font-weight: 400;\">. Chapter 7 bankruptcy is generally the cheapest to file since the attorney has less work than Chapter 13 or Chapter 11. <\/span><\/li>\n<li><b style=\"font-style: inherit;\">Fastest<\/b><span style=\"font-weight: 400;\">. It takes 3-12 months after filing for a Chapter 7 discharge.<\/span><\/li>\n<li><b style=\"font-style: inherit;\">No monthly fee is necessary.<\/b><span style=\"font-weight: 400;\"> Since there is no surplus income, there is no need to make monthly payments to creditors (as in Chapter 13).<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">If you have non-exempt assets, you may engage in a voluntary &#8220;<\/span><b>buy-back<\/b><span style=\"font-weight: 400;\">&#8221; arrangement with your Chapter 7 Trustee to avoid losing them. Buy-back agreements are usually just 12 months long (as opposed to 60 months in a typical Chapter13). It is not because you earn a lot of money, but because you have amassed more property than you are permitted to exempt, and you don&#8217;t want to give up your non-exempt assets.<\/span><\/p>\n<h3><em><strong>Cons of Chapter 7<\/strong><\/em><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Limiting<\/b><span style=\"font-weight: 400;\">.No way to halt a foreclosure. If your house is under <\/span><strong><a href=\"https:\/\/westbrooklawgroup.com\/foreclosure-attorney\/\">foreclosure<\/a><\/strong><span style=\"font-weight: 400;\">, Chapter 7 can only temporarily stop the foreclosure process. Eventually, you&#8217;ll have to let your house go.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Not guaranteed<\/b><span style=\"font-weight: 400;\">. You may desire to file Chapter 7 but are unable to do so because you exceeded the median income.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><b>Chapter 13 Pros &amp; Cons<\/b><\/h2>\n<p>&nbsp;<\/p>\n<h3><em><strong>Pros of Chapter 13<\/strong><\/em><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Stop a foreclosure<\/b><span style=\"font-weight: 400;\"> if you are facing mortgage foreclosure.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Prevent losing valuables<\/b><span style=\"font-weight: 400;\">. If you are concerned about <a href=\"\/2015\/11\/30\/no-asset-bankruptcy-explained-st-charles-chapter-7-lawyer\/\"><strong>losing valuable assets in a Chapter 7 bankruptcy<\/strong><\/a>, then a Chapter 13 bankruptcy may be the answer. You may desire to safeguard rental property that might be lost in a Chapter 7 bankruptcy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Even if you don&#8217;t qualify for Chapter 7 because of your monthly income,\u00a0 you may petition for Chapter 13 to get <\/span><b>debt relief<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h3><em><strong>Cons of Chapter 13<\/strong><\/em><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>More costly.<\/b><span style=\"font-weight: 400;\"> Chapter 13 cases need substantially more time and effort from the debtor&#8217;s attorney. Therefore, the expense is generally twice or more than a Chapter 7 case.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Time-consuming<\/b><span style=\"font-weight: 400;\">. Most Chapter 13 plans last five years, or 60 months<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Requires financial restraint<\/b><span style=\"font-weight: 400;\">. You must go on a budget. Budget and expenses must be kept low. Every month&#8217;s surplus revenue must be paid to creditors.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><b>How to Qualify for Chapter 7 Bankruptcy<\/b><\/h2>\n<p><a href=\"https:\/\/westbrooklawgroup.com\/wp-content\/uploads\/2022\/01\/bankruptcy-chapter-7-vs-13-.webp\"><img fetchpriority=\"high\" decoding=\"async\" class=\"alignright wp-image-4911\" title=\"bankruptcy chapter 7 vs 13\" src=\"https:\/\/westbrooklawgroup.com\/wp-content\/uploads\/2022\/01\/bankruptcy-chapter-7-vs-13--300x200.webp\" alt=\"bankruptcy chapter 7 vs 13\" width=\"400\" height=\"267\" srcset=\"https:\/\/westbrooklawgroup.com\/wp-content\/uploads\/2022\/01\/bankruptcy-chapter-7-vs-13--300x200.webp 300w, https:\/\/westbrooklawgroup.com\/wp-content\/uploads\/2022\/01\/bankruptcy-chapter-7-vs-13--768x512.webp 768w, https:\/\/westbrooklawgroup.com\/wp-content\/uploads\/2022\/01\/bankruptcy-chapter-7-vs-13-.webp 1024w\" sizes=\"(max-width: 400px) 100vw, 400px\" \/><\/a><\/p>\n<p><span style=\"font-weight: 400;\">Only specified income levels qualify for Chapter 7 bankruptcy. To qualify for the income standards, a filer&#8217;s income must be equal to or below the state&#8217;s median income.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Every state has its laws. A debtor who meets a state&#8217;s income standards may petition Chapter 7.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To <strong><a href=\"\/2012\/09\/29\/the-means-test-and-what-it-means-to-consumers\/\">determine eligibility for Chapter 7<\/a><\/strong>, the debtor must submit to a &#8220;<\/span><b>means test<\/b><span style=\"font-weight: 400;\">&#8221; if their income exceeds the state median.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Chapter 7 Means Test 101<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The <strong><a href=\"\/missouri-bankruptcy-means-test\/\">means test<\/a> <\/strong>discourages filers from repaying creditors. On the means test, debt and income from the last six months are assessed.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You will fail the means test if you have monthly income left over after paying your creditors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Even if you are disqualified for Chapter 7, you may file for Chapter 13. In a Chapter 13 bankruptcy, the debtor repays creditors over five years.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Who Can&#8217;t File Chapter 7?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">You are disqualified for Chapter 7 bankruptcy in the following situations:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A prior Chapter 7 debt dismissed within the last eight years<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A prior Chapter 13 debt dismissed within the last six years<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Your debts and income would support a Chapter 13 application.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You tried to cheat creditors or the court.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You skipped <strong><a href=\"\/2013\/12\/27\/st-louis-bankruptcy-attorney-what-is-credit-counseling\/\">credit counseling<\/a><\/strong>.<\/span><\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<h2><b>Chapter 7 Filing<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">You will be required to undergo credit counseling. After completing<strong> <a href=\"\/2013\/12\/27\/st-louis-bankruptcy-attorney-what-is-credit-counseling\/\">credit counseling through a US Trustee-approved service<\/a><\/strong>, you may petition for bankruptcy in a local bankruptcy court.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Filing has a cost. Consult the Trustee&#8217;s Office for the specific figure. You must submit information on:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Income<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Debt<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Expenditures<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Creditors&#8217; <strong><a href=\"\/2015\/10\/22\/secured-debt-explained-st-charles-debt-management-attorney\/\">secured and unsecured debts<\/a><\/strong><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Prior property sale<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Exempt property list<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Exempt property is a property that a debtor may retain under Chapter 7. Exempt property varies per state but commonly includes clothes, furniture, and automobiles.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>How to Qualify for Chapter 13 Bankruptcy<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Not everyone qualifies. You may be prohibited from Chapter 13 bankruptcy if:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>You don&#8217;t make enough money.<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\"><span style=\"font-weight: 400;\">Chapter 13 debtors must generate enough monthly income to pay off secured commitments like a car or a house. You may be denied this kind of bankruptcy if you don&#8217;t earn enough money or your income is unreliable.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>You owe an excessive amount of money.<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\"><span style=\"font-weight: 400;\">If a debtor&#8217;s outstanding obligations are excessive, he or she may be rejected from Chapter 13.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Chapter 13 Filing<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Consider meeting with a nonprofit credit counselor and a knowledgeable <strong><a href=\"\/2013\/12\/19\/st-louis-chapter-7-bankruptcy-lawyer-bankruptcy-and-divorce\/\">bankruptcy lawyer<\/a><\/strong> in St. Charles. Consulting them will help you understand your situation and determine if bankruptcy is the best option.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In Chapter 13 bankruptcy, you and your lawyer must establish your debt restructuring eligibility to a bankruptcy trustee. You&#8217;ll seek court approval for a <strong><a href=\"\/2016\/07\/29\/strategies-repaying-debt-st-louis-bankruptcy-lawyer\/\">repayment plan<\/a><\/strong> for both unsecured and secured debts. You remit monthly payments from three to five years and keep your assets. Finally, certain debts may be forgiven.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">After deciding to file, follow these steps:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Complete pre-bankruptcy credit counseling:<\/strong> Choose a nonprofit credit counseling service. They may also assist you in creating a repayment plan.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><a href=\"\/2013\/05\/29\/st-louis-chapter-7-bankruptcy-lawyers-can-help-you-get-your-life-back-on-track\/\"><strong>Hire a bankruptcy lawyer:<\/strong><\/a> Incorrectly filling out a form or omitting a step might result in your case being dismissed or some debts not being reimbursed.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Fill out forms:<\/strong> Your lawyer will assist you to fill out the necessary paperwork. Gather details about your debts, income, property, and monthly costs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><a href=\"\/2016\/12\/13\/expect-bankruptcy-filing-fees\/\"><strong>File the bankruptcy petition:<\/strong><\/a> Submitting the required paperwork sets off the procedure. You will be assigned a bankruptcy trustee when you file and the court will trigger an &#8220;automatic stay,&#8221; which prevents most debt collectors from contacting you.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Payment plan submission:<\/strong> Within 14 days of petition filing, you must submit a payment plan. Even if the petition isn&#8217;t authorized, you must begin settling payments within 30 days of filing.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>After you submit the petition,<\/strong> the trustee will convene a meeting of creditors.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Confirmation hearing:<\/strong> 45 days after the creditors&#8217; meeting, you, the trustee, and any creditors who desire to attend, confirm the payment plan.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Payment:<\/strong> Creditors are paid over three to five years.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Before filing Chapter 13 bankruptcy,<\/strong> you must finish a nonprofit credit counseling agency&#8217;s &#8220;debtor education course.&#8221;<\/span><\/li>\n<\/ol>\n<p><b>Takeaway: Using chapters 7 or 13, bankruptcy does have consequences. Consulting a lawyer from Westbrook Law Group is highly recommended for this process.<\/b><\/p>\n<p><span style=\"font-weight: 400;\">While there are some substantial variations between chapters 7 and 13, the option is ultimately yours. Weigh what you&#8217;re comfortable with against what you&#8217;ll benefit from more and use the information provided here to help steer your decision. Either way, Westbrook Law Group would love to speak with you more about your financial situation &#8211;<\/span><span style=\"font-weight: 400;\">&#8211; <\/span><a href=\"https:\/\/westbrooklawgroup.com\/contact\/\"><span style=\"font-weight: 400;\"><strong>schedule a call today to get started.<\/strong><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Are you thinking of filing for bankruptcy? You&#8217;ve read that there are two types: Chapter 7 and Chapter 13. Is one better than the other, and should you go with one or the other? What is the difference between these two types of bankruptcy? Will you qualify for Chapter 7 or 13 bankruptcy? Which documents [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":4911,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[39,92,91],"tags":[],"_links":{"self":[{"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/posts\/4910"}],"collection":[{"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/comments?post=4910"}],"version-history":[{"count":8,"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/posts\/4910\/revisions"}],"predecessor-version":[{"id":4919,"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/posts\/4910\/revisions\/4919"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/media\/4911"}],"wp:attachment":[{"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/media?parent=4910"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/categories?post=4910"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/westbrooklawgroup.com\/wp-json\/wp\/v2\/tags?post=4910"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}