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What is the difference between Chapter 13 and Chapter 7?

Are you one of the many Tennessee residents who struggle with debt? Do you feel that you have no way out of your current situation? Guess what? That may not be true. Bankruptcy may offer the relief you are looking for.

There are two types of bankruptcy available to consumers: Chapter 13 and Chapter 7. They are very different in what they accomplish. How does each of these forms of bankruptcy work?

Chapter 13 bankruptcy overview

A Chapter 13 bankruptcy is for individuals or couples who have money coming in, but not enough to cover all of their debts. It is for people who want to repay their debts, but need a little help doing so. It is for those who want to save their home from foreclosure, stop auto repossession and keep nonexempt property. It is for anyone who has debts that the court will not discharge through bankruptcy. Such debts include:

  • Student loans
  • Certain tax debt
  • Court fees
  • Alimony
  • Child support

If this type of bankruptcy filing receives approval, an affordable repayment schedule will be put into action. You will have three to five years to pay down debt. Anything eligible for discharge after that will be.

Chapter 7 bankruptcy overview

A Chapter 7 bankruptcy is for individuals who lack income. They tend to make below the state median income level or simply lack disposable income after paying for their basic needs. If you do not meet the income qualification for this form of bankruptcy, Chapter 13 may be the best option if you wish to proceed with a bankruptcy filing.

Chapter 7 is for people who do not have enough property to worry that it will not fit into an exemption category or do not care to keep all of their possessions. It is for people who simply want quick relief from creditors. It is for those who have debts that are eligible for discharge, such as:

  • Credit card debt
  • Auto loans
  • Personal loans
  • Medical debt

From filing to approval can take roughly three months, but once the court approves, relief is almost instant.

Need help deciding is right for you?

If you are unsure which type of bankruptcy you qualify for or which would best suit your needs, it is okay to ask questions. There are advantages and disadvantages to both types and legal counsel can explain those in detail to you so you can make the best decision for your circumstances.

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